UPSC Prelims 2022 – Question 6

by Edukemy Team February 19, 2024

Table of Contents

They can sell their own goods in addition to offering their platforms as marketplaces.
The degree to which they can own big sellers on their platforms is limited.

Select the correct answer using the code given below:
a) 1 only
b) 2 only
c) Both 1 and 2
d) Neither 1 nor 2

Answer – B

After Walmart’s $16bn purchase of Flipkart in 2018, the rules for foreign-owned e-commerce firms were tightened further, with unexpected severity. Two restrictions predominate.
Statement 1 is incorrect: First, foreign firms are prevented from holding inventory or selling their own goods, which both Amazon and Walmart do in other markets. They can offer their platforms only as “marketplaces” for other buyers and sellers.FDI policy in E-Commerce permits foreign direct investment in the marketplace model of e-commerce to the extent of 100% under the automatic route, however, FDI (foreign-owned e-commerce firms) is not permitted in an inventory-based model (owning products and selling them directly to buyers) of e-commerce.
Statement 2 is correct: Second, the degree to which they can own big sellers on their platforms is limited, to prevent those sellers acting covertly on their behalf. The FDI policy further states that E-commerce entities providing a marketplace will not exercise ownership or control over the inventory i.e. goods purported to be sold. Such an ownership or control the inventory will render the business into the inventory-based model. Inventory of a vendor will be deemed to be controlled bye-commerce marketplace entity if more than 25% of purchases of such vendors are from the marketplace entity or its group companies.

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