E-com clarification adds to confusion

The government’s attempt on Thursday to provide clarity regarding its e-commerce rules announced last week seems to have backfired, with the clarification, instead, creating a lot of confusion, notably regarding whether private labels can be sold on e-commerce portals or not.

The reason for the confusion, according to lawyers conversant with the matter, seems to be that the reference in Thursday’s clarification to ‘private labels’ is to the products sold under these labels and not the companies behind the labels, as assumed by many.

“Concerns have been raised that Press Note 2/2018 prohibits sale of private label products through the marketplace,” the Department of Industrial Policy and Promotion (DIPP) said in press release on Thursday. “It is clarified that present policy does not impose any restriction on the nature of products which can be sold on the marketplace.”

“They are saying they are not restricting any product from being sold in the marketplace, but they are restricting the players who can sell it,” L. Badri Narayanan, partner, Lakshmikumaran & Sridharan. said. “For example, Amazon Basics or Flipkart Essentials, are sold on only Amazon and Flipkart, respectively. But the condition in the rules [released last week] specifically says that group companies are not allowed to sell on the platform.”

“But, if, for example, Tata Croma wants to sell products from Amazon Basics on the Amazon website, then there is no restriction on the sale of such labels,” Mr. Narayanan added. “But then, this is no longer a private label.”

Dilution of stance?

The ambiguity in the wording of the clarification on Thursday led many commentators and media houses to conclude that the government had diluted its earlier stance and now allowed private labels owned by e-commerce companies to sell their products on that e-commerce company’s portal.

Officials in the Ministry of Commerce declined comment when contacted by The Hindu , and queries mailed to the DIPP Secretary have so far been unanswered.

The clarification on Thursday has drawn criticism from traders’ bodies with the Confederation of All India Traders (CAIT) saying that there is no ambiguity in the original rules saying that private labels owned by e-commerce companies would not be allowed to sell on their portals.

“The nature of the product does not have any linkage with private labels or branding,” Praveen Khandelwal, national secretary general of CAIT told The Hindu . “They have already mentioned in the earlier provisions that any entity in which the marketplace has a stake, will not be allowed to sell its goods on the same marketplace. It is very clear that the situation will remain as it is. Private labels with a stake owned by the marketplace will not be allowed.”

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