# FDI in ecommerce under ED Scrutiny  Published: 19 Nov 2024 | Last updated: 05 Mar 2025 Author: Treelife Practice area: News Source: https://treelife.in/news/fdi-in-ecommerce-under-ed-scrutiny/ --- Blog Content Overview - [0.1 Key findings, on quizzing “top” five sellers, include:](#Key_findings_on_quizzing_top_five_sellers_include) - [1 FDI in E-Commerce – Guidelines](#FDI_in_E-Commerce_Guidelines) [1.1 B2B E-commerce activities (not retail)](#B2B_E-commerce_activities_not_retail) - [1.2 Market place model of e-commerce](#Market_place_model_of_e-commerce) - [1.3 E-commerce](#E-commerce) - [1.4 ‘Market place model of e-commerce’](#8216Market_place_model_of_e-commerce8217) - [1.5 ‘Inventory based model of e-commerce’](#8216Inventory_based_model_of_e-commerce8217) - [1.6 Permissible Transactions](#Permissible_Transactions) - [1.7 Seller Responsibility](#Seller_Responsibility) - [1.8 Ownership and Control](#Ownership_and_Control) - [1.9 Fair Competition](#Fair_Competition) - [2 Restrictions](#Restrictions) The Enforcement Directorate (ED) has uncovered direct links between Amazon, Flipkart, and their preferred sellers, alleging violations of FDI rules. ### **Key findings, on quizzing “top” five sellers, include:** - Preferred sellers are often linked to former employees or associates, with their inventory, profit margins, and even bank accounts allegedly controlled by the e-commerce giants. - Sellers with massive turnovers report minimal profits, raising red flags about manipulated margins. - Issues with the “Just in Time” (JIT) stock-gathering model, suggesting it violates FDI rules by reducing the marketplace to a multi-brand platform for the giants’ benefit. By controlling inventory, warehouses, and profits, Amazon and Flipkart are accused of undermining the FDI norm’s purpose of fostering a fair marketplace for small retailers. ED plans to file a complaint within 3 months and summon top officials for questioning. Read more here –[ ](https://lnkd.in/djcsr3-a)[https://economictimes.indiatimes.com/epaper/delhicapital/2024/nov/19/et-comp/enforcement-directorate-uncovers-direct-links-between-amazon-flipkart-and-sellers/articleshow/115428846.cms](https://economictimes.indiatimes.com/epaper/delhicapital/2024/nov/19/et-comp/enforcement-directorate-uncovers-direct-links-between-amazon-flipkart-and-sellers/articleshow/115428846.cms)  Need a quick refresher on FDI rules in e-commerce? We have created a handy cheat sheet to break it down here. ## **FDI in E-Commerce – Guidelines** ### **B2B E-commerce activities (not retail)** - **100% FDI permitted under the automatic route** ### **Market place model of e-commerce** - **100% FDI permitted under the automatic route** ### **E-commerce** Means buying and selling of goods and services, including digital products, over digital & electronic networks. ### **‘Market place model of e-commerce’** Means providing an information technology platform by an e-commerce entity on a digital and electronic network to act as a facilitator between buyer and seller. ### **‘Inventory based model of e-commerce’** Means an e-commerce activity where inventory of goods and services is owned by the e-commerce entity and is sold to the consumers directly. ### **Permissible Transactions** - Marketplace e-commerce entities are **permitted to enter into B2B transactions with registered sellers**. - E-commerce marketplace entities **may provide support services** to sellers (e.g., logistics, warehousing, marketing). ### **Seller Responsibility** - Seller details (**name, address, contact**) must be displayed for goods/services sold online. - **Delivery and customer satisfaction** post-sale are the **seller’s responsibility**. - **Warranty/guarantee** of goods/services rests solely with the seller. ### **Ownership and Control** - Marketplace e-commerce entities **must not exercise ownership** over the inventory. - **Control is deemed** if over **25% of a vendor’s purchases** are from the marketplace entity or its group companies. - Entities with **equity participation or inventory control** by a marketplace entity **cannot sell on that entity’s platform**. ### **Fair Competition** - Marketplace entities **cannot influence pricing** of goods/services and must ensure **fair competition**. - Services like **fulfillment, logistics, and marketing** must be provided **fairly and at arm’s length**. - **Cashbacks by group companies** must be **fair and non-discriminatory**. - **Sellers cannot be forced** to sell products exclusively on any platform. --- ## **Restrictions** - **FDI is not allowed** in **inventory-based** e-commerce models. What’s your thought? Reach out to us at priya.k@treelife.in for a deeper discussion or leave a comment below! Powered By EmbedPress ### Related posts: - [Reverse Flipping for Startups: A New Shift Towards India](https://treelife.in/news/reverse-flipping-for-startups-a-new-shift-towards-india/) - [Foreign Liabilities and Assets (FLA), Annual Date Approaches](https://treelife.in/news/foreign-liabilities-and-assets-fla-annual-date-approaches/) - [IFSCA’s Single Window IT System (SWIT): A Game Changer for Businesses in GIFT City](https://treelife.in/news/ifscas-single-window-it-system-swit-a-game-changer-for-businesses-in-gift-city/) - [Major Boost for Reverse Flipping: Indian Startups Coming Home](https://treelife.in/news/major-boost-for-reverse-flipping-indian-startups-coming-home/) --- This is informational content from Treelife. For advice specific to your situation, contact support@treelife.in