India’s largest traders’ association CAIT on Tuesday said few multinational e-commerce giants with a heavy arsenal of funding are attempting to flout foreign investment guidelines for the sector and demanded strict enforcement action.

Releasing a whitepaper on the e-commerce policy, the Confederation of All India Traders (CAIT) said e-commerce entities have “structured their relationship as marketplace with sellers in a such a way that they are in a position to control either seller on their platform or the inventory and also escape the scrutiny of the enforcement agencies.”

“Under the guise of such control or ownership over sellers, the issue also permeates from being a mere FDI policy violation to also being an anti-competitive conduct,” it said. “The mitigating measures and strict action for enforcement of the law in letter and spirit are of paramount importance.”

Otherwise, the FDI policy on e-commerce will fail in its objective of catering to the interests of domestic manufacturers, traders, sellers, MSMEs, start-ups and creation of level-playing field in retail, it added.

CAIT said the government policy allows for 100 per cent foreign direct investment (FDI) in single-brand retail trading (SBRT) and B2B cash and carry. However, in the case of multi-brand retail trading (MBRT), FDI up to 51 per cent is allowed only through the government approval route with a large number of conditions to protect the business of MSMEs and small traders.

Since inventory-based e-commerce is nothing but operating a multi-brand retail store through electronic means, no FDI has been allowed in the case of such a model of e-commerce under the FDI policy.

However, to enable the proliferation of technology that can help MSME and kiranas, 100 per cent FDI through the automatic route has been allowed to set up the e-commerce marketplace platform. This is with a caveat that any entity operating such a technology platform will not own/ control the inventory of any seller on the platform as that will be tantamount to the operation of multi-brand retail trading.

“The above conditions are strict and clear in their intent to prohibit the entities with FDI to carry out any kind of electronic version of MBRT i.e. inventory-based e-commerce. “Howsoever, few multinational e-commerce entities with heavy arsenal of funding, operating in India under the guise of the complex business structure have attempted to flout the above FDI conditions,” it added.