Wondered how Amazon and Flipkart are advertising discounts big time without flouting foreign direct investment rules? The companies are shielded by a disclaimer.

E-commerce companies, advertising their mega online festival sales in leading publications, have managed not to violate the rules by giving a disclaimer that the discounts are being extended by the sellers and not them, a senior government official said.

“We had a meeting with e-commerce companies following complaints made by brick-and-mortar retailers on the discounts being offered online as FDI rules do not allow this. We told them that if indeed the discount is being offered by the vendors and not them, it should be spelt out in their advertisements. Now they have started doing so,” an official from the Department of Industrial Policy and Promotion told BusinessLine .

Marketplace model

India’s FDI rules allow foreign investments in e-commerce only if the marketplace model is followed, which means that the online company cannot sell its own products and only provide a platform to other vendors to sell their items.

The guidelines also make it clear that e-commerce players with FDI will not directly or indirectly influence the sale price of goods or services and will maintain a level-playing field.

“Since the e-commerce companies are now giving disclaimers printed on the advertisements that they were not offering the discounts, on paper they have not flouted any law. If any party still feels that such companies are lying, then they are liable to be prosecuted for wrongly stating facts. But this has to be proved,” the official said.

Meanwhile, a number of retailers, including Future Group CEO Kishore Biyani, and senior executives of Shoppers Stop, Tata Group, Aditya Birla Group and Landmark Group, met Finance Minister Arun Jaitley on Thursday to demand a level-playing field for brick-and-mortar stores.

The Retailers Association of India took up various issues related to policies to develop the retail sector. The delegation emphasised that the government support Indian-managed, Indian-owned retail businesses to access global capital up to 49 per cent without any restrictions.

Both Flipkart and Amazon India have claimed record volumes in the festival sales early this month. While Flipkart stated that it sold more than half a million products within an hour on the first day of its flagship Big Billion Day sales, Amazon asserted that it sold more than 100,000 units in the first half-an-hour of the first day.

This Diwali season, offline retailers are worried of low business because of the sharp increase in online purchases on account of the discounts and advertisements.

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