DPIIT to examine FDI compliance in e-commerce by Uber Eats, Faasos

Department for Promotion of Industry and Internal Trade (DPIIT) officials met representatives of cloud kitchens Faasos and Uber Eats as well as food aggregators Swiggy and Zomato to examine whether these firms violated foreign direct investment (FDI) norms in e-commerce.

The meeting, which took place on Tuesday, was also attended by representatives of the National Restaurant Association of India (NRAI).  

“Private entities that participated in the meeting have informed the DPIIT that companies like Faasos and Uber Eats have been playing foul with FDI rules,” said a person aware of the discussions.

Current rules allow up to 100 per cent FDI under the automatic route in the marketplace model of e-commerce, but bar any investments in the inventory based model of e-commerce. 

In December 2018, the government had tightened FDI conditions in the online space, stating that an e-commerce platform with foreign investment cannot exercise ownership or control over the inventory sold on its platform.

The DPIIT was approached by the NRAI last year to provide clarity on whether these rules apply to food aggregators and food delivery firms as well. Both Uber Eats and Faasos operate out of multiple physical locations, classified as ‘cloud kitchens’. 

"We are in touch with relevant agencies and are investigating this. However, we are not marketplace aggregators. We run our own restaurants. Therefore, this situation as well as the discussion at hand are not applicable to us, at Rebel Foods," said a Rebel Foods spokesperson, the parent company of Faasos. 

These properties are in certain cases owned by them, and both extend direct control over the labour and capital used to run the daily operations, the participants said.  Faasos has investments from Lightbox Ventures and Sequoia Capital India, among others. Its parent, Rebel Foods, also owns brands like Oven Story, Lunch Box, and Behrouz Biryani. 

The DPIIT has said it would inquire into the charges and letters would be sent to the two companies to clarify. However, the government has taken note of the fact that both businesses maintain their own e-commerce platforms through websites and mobile applications.

“Discussions were held on the agenda points as directed by the DPIIT. They relate to cloud kitchens, exclusivity on aggregator platforms, and issues related to the algorithms used by these aggregators. Both sides put up their points for consideration by the department. Further outcomes will be communicated by the DPIIT after due deliberations,” the NRAI said in a statement.