Amid the ongoing tussle between the restaurant association and food aggregators, the spotlight is back on the grey area on whether or not the country’s revised foreign direct investment (FDI) e-commerce guidelines govern the food aggregator business.
Last year, India revised its FDI policy for e-commerce marketplaces to bring more clarity on the way they function.
While, some experts said that services such as food delivery are likely to fall under the ambit of e-commerce guidelines, others privy to the discussions maintained that regulators have unofficially exempted food aggregators from the policy that is applicable to marketplaces such as Flipkart and Amazon. However, no formal communication has been made on the same.
“The department should issue a clarification to settle the water on this particular issue because there has been too much back and forth within the industry. Everybody has been raising the issue and there has been no guidance given by the government on this particular thing," said Rishi Anand, partner, DSK Legal.
Last year the government clarified norms that govern foreign investment and the functioning of an e-commerce marketplace in its Press Note 2. While it did not explicitly state the sectors these new rules apply to, some were of the view that food aggregators that are tech-enabled platforms helping with the delivery and payment of food orders, are likely to be covered under the rules.
The new guidelines which came into effect from 1 February, prohibit marketplaces from directly or indirectly influencing sale price of goods and services and instruct them on maintaining a level playing field. The new norms also bar exclusive tie-ups between e-commerce firms that follow the marketplace model and vendors using their platform.
Food aggregators have been in the news as India’s restaurants have been at loggerheads with some membership driven dining platforms that they say are distorting the food services market by hefty discounting. The move against reservation- and membership-driven dining apps like EazyDiner (Prime), Zomato Gold, Dineout, Nearbuy and Magicpin is being led by the NRAI that represents half a million restaurants.
Earlier this year NRAI approached the Department for Promotion of Industry and Internal Trade claiming that food aggregators were indulging in discriminatory practices and were therefore not in compliance of some of the new policies articulated in the updated Press Note 2.
Several food aggregators had also met DPIIT officials and a person privy to the meeting said that these companies have for now been exempted from the e-commerce policy or Press Note 2. “Going back to the revised Press Note 2, is intended for products and trading of products and not trading of services, which is what these food aggregators are engaged in," said this person declining to be named.
Questions emailed to Swiggy, Zomato and UberEats did not elicit a reply. NRAI maintained that since these apps list restaurants, they also facilitate buying of food by consumers from these restaurants and are therefore unambiguously e-commerce entities and come under the ambit of the FDI policy. It further raised concerns on the lack of compliances by aggregators to some of the clauses.