Home grown online marketplace, Snapdeal is all for the new FDI policy. However last year, its contract with sellers would have clashed with the new FDI policy. In October 2015, the etailer discarded a clause from its contract with online sellers. The clause allowed the marketplace to influence pricing.
The contract was amended barely a month after offline retailers filed a petition to the Delhi High Court. The petition alleged ecommerce companies of violating the laws of foreign investment.
In September, based on the petition filed by the All India Footwear Manufactures & Retailers Association, the Delhi High Court stated there had been a “prima facie” violation of foreign investment rules, by ecommerce companies.
According to Snapdeal, the updated agreement lacks a key clause that the previous one had. The provision enabled it to “discover and display” the prices payable by buyers based on competitive pricing prevalent in the market.
The etailer announced, previous October, the revised agreement would be made effective by 15 October 2015. All sellers who continue to use Snapdeal after that would be considered to have agreed to the newly set conditions.
The new agreement labeled Snapdeal as an intermediary between buyers and sellers.
The old Snapdeal marketing and distribution agreement with its sellers said, the marketplace had the right to run promotions offering consumers multiple discounts or benefits on the website.
A Snapdeal spokesperson responded to queries about the matter saying,
“We work closely with our sellers to help them derive maximum benefit from the marketplace. We update our seller agreement as per changing business requirements and market developments.”
The spokesperson did not get into specifics about the reasons for revising the agreement.
The Department of Industrial Policy and Promotion (DIPP) introduced guidelines regarding FDI in ecommerce, this March. According to these guidelines marketplaces are not allowed to influence prices either directly or indirectly.
Heavy discounts are frowned upon by the new FDI ruling. This creates a more leveled playing field for offline retail businesses to compete with their online rivals.
Many marketplaces have asked for time to get their business in order so they can comply with the FDI guidelines. Amazon says it will follow FDI norms for the benefit of its sellers. Flipkart is also making changes to adhere to FDI requirements. However, associations like CAIT and AIOVA are keeping close tabs on marketplaces and have pointed out situations where marketplaces seem to be violating FDI principles.
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