With reference to foreign-owned e-commerce firms operating in India, which of the following statements is/are correct ? 1. They can sell their own goods in addition to offering their platforms as market-places. 2. 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 ✓ UPSC's answer
- (c) Both 1 and 2
- (d) Neither 1 nor 2
Why the answer is (b)
• India's FDI policy permits 100% foreign investment in the 'marketplace' model of e-commerce but prohibits it in the 'inventory' model.
• Statement 1 is wrong: a foreign-owned marketplace cannot own the goods it sells; it may only provide a platform connecting buyers and sellers.
• Statement 2 is correct: since Press Note 2 of 2018, a marketplace or its group companies may not hold equity in sellers on the platform, and no seller may source more than 25% of its inventory from the marketplace entity — limiting control over big sellers.
• These rules underlie disputes involving Amazon and Flipkart.
• Hence 2 only, option (b).
Why the other options are wrong
- (a) 1 only
- Statement 1 is wrong: foreign marketplaces cannot sell their own inventory.
- (c) Both 1 and 2
- Statement 1 is wrong, so both cannot be correct.
- (d) Neither 1 nor 2
- Statement 2 is correct: ownership of sellers is restricted.
Asked in the GS Paper I of the UPSC Civil Services Preliminary Examination 2022, held on 5 June 2022. Question and answer key: Union Public Service Commission. Explanation: UPSC Answer Check.