India’s booming quick commerce sector—known for delivering groceries and daily essentials in as little as 10 minutes may be heading toward a regulatory crossroads. Growing scrutiny from policymakers and trade bodies has raised serious questions about whether the business models adopted by several leading platforms comply with India’s foreign direct investment (FDI) rules governing e-commerce. At the centre of the debate is a fundamental regulatory question: are these platforms operating as neutral online marketplaces, as permitted under India’s FDI policy, or are they effectively running inventory-based e-commerce businesses an activity in which foreign investment is strictly prohibited?
In January last year, the Department for Promotion of Industry and Internal Trade (DPIIT), the nodal government agency for framing policy around foreign direct investment in the country, convened a meeting with executives from major quick commerce companies. The discussion reportedly focused on the operational structure of these platforms, particularly the role of “dark stores”—small warehouses located close to urban consumers that enable ultra-fast deliveries. The regulatory’ interest signals a potential shift toward stricter enforcement of India’s e-commerce FDI regime, a framework that has long attempted to maintain a distinction between technology platforms that merely facilitate purchase and sale commonly known as ‘marketplace-based e-commerce’ as opposed to the companies that own and sell inventory directly ‘inventory-based e-commerce’. Under India’s FDI policy, 100% foreign investment is permitted in marketplace-based e-commerce models. These platforms function as digital intermediaries that connect buyers and sellers but do not own the products being sold. Inventory-based e-commerce models, however—where companies own and sell goods directly to consumers—are barred from receiving any foreign direct investment.
To prevent indirect control of inventory, the policy also specifies that if more than 25% of a vendor’s purchases originate from the marketplace entity or its affiliated companies, the inventory may be considered as controlled by the platform. In addition, marketplace entities are not permitted to influence the sale price of goods sold on their platforms. These provisions were designed to ensure that e-commerce marketplaces remain neutral intermediaries rather than disguised retailers. The micro-fulfilment centers commonly known as ‘dark stores’ typically located within two to four kilometres of customers—have become the backbone of the quick commerce model. By stocking frequently purchased items close to urban neighbourhoods, platforms can promise deliveries within minutes. However, regulators and industry groups argue that these facilities blur the line between a marketplace and an inventory-led retail operation.
Several key legal questions have emerged on the dark store operations. Firstly, who owns the goods stored in dark stores? Platforms claim that independent vendors retain ownership of the inventory. Critics, including trader associations, argue that platforms effectively control the stock through operational and pricing decisions. Secondly, who bears the economic risk and consequences of storage and upkeep? If goods become obsolete or damaged during storage or delivery, it remains unclear whether vendors or platforms absorb the losses. And lastly, does control of infrastructure imply operational control? Since dark store facilities and logistics systems are often owned or managed by the platform, regulators are examining whether vendors are merely nominal participants in this form of business model.
Trade bodies such as the Confederation of All India Traders (CAIT) have alleged that quick commerce companies exercise substantial influence over vendor operations. Amongst the concerns raised are claims that platforms decide which products are stocked in dark stores, determine quantities, and influence pricing—potentially violating FDI policy that prohibit marketplace entities from affecting sale prices. Another issue relates to vendor dependency. In many cases, a seller or manufacturer may derive the majority of its revenue from a single platform. While the FDI policy restricts procurement dependency through the 25% segregation rule, it does not address sales dependency—creating what some analysts describe as a regulatory loophole.
Faced with regulatory uncertainty, some companies are exploring structural changes to reduce FDI-related risks and to achieve “Indian Owned and Controlled Company” (IOCC) status. As per the FDI policy, the companies classified as IOCCs are treated as domestic entities. This allows them to adopt inventory-based e-commerce models without violating FDI restrictions. However, the IOCC strategy raises its own legal complexities. If foreign investors continue to retain significant governance rights—such as veto powers or board representation—regulators may question whether control truly rests with Indian shareholders.
A key difficulty in regulating quick commerce lies in the fact that many of its core concepts are not addressed directly in the existing FDI policy framework. Terms such as “ownership” and “control” are frequently used but not clearly defined, leaving room for interpretation. It remains unclear whether ownership refers only to legal title or also includes beneficial ownership and economic risk. Similarly, the FDI policy does not define “quick commerce” or address hybrid models in which platforms combine elements of logistics, warehousing, manufacturing, and online retail.
As companies expand into adjacent areas—such as private-label products or in-house prepared food—regulatory classification becomes even more complex. In such cases, questions arise about whether the activity falls under manufacturing, retail trading, or prohibited inventory-based e-commerce. Several regulatory outcomes are possible. The DPIIT may issue clarifications specifically addressing quick commerce operations and dark store models. Alternatively, the government could amend the FDI policy to create new rules tailored to ultra-fast delivery businesses. Another possibility is that companies across the sector may adopt IOCC structures, allowing them to operate inventory-based models while continuing to raise domestic capital.
The stakes are significant as billions of rupees in foreign investment have flowed into India’s quick commerce ecosystem, which has rapidly reshaped urban retail and consumer behaviour. Yet the industry’s innovative logistics and operating models have developed faster than the regulatory framework governing them. Until policymakers clarify how FDI rules apply to dark stores and ultra-fast delivery platforms, companies will continue to navigate a legal landscape where business innovation and regulatory constraints remain in tension. For now, the future of India’s quick commerce revolution and the dark stores that power it may depend on how regulators choose to interpret the fine line between a marketplace and a retailer.
About the authors: Puneet Shah is a Partner and Shubham Rustagi is an Associate at IC RegFin Legal.
Views are personal.
Disclaimer: The opinions expressed in this article are those of the author(s). The opinions presented do not necessarily reflect the views of Bar & Bench.
If you would like your Deals, Columns, Press Releases to be published on Bar & Bench, please fill in the form available here.