Introduction
In our previous blog post, we provided insights into the regulatory framework governing E-Commerce Food Business Operators (“E-FBOs”)[1] that operate under the purview of the Food Safety and Standards Authority of India (“FSSAI”). The FSSAI, along with its state counterparts, is primarily empowered under the Food Safety and Standards Act, 2006 (“FSS Act”) and its accompanying rules, regulations, and guidelines to regulate the food industry and establish standards that ensure the safety and quality of food products. We also delved into the recent amendment to the FSS Licensing and Registration of Food Businesses Amendment Regulations, 2021 (“2021 Amendment Regulations”)[2], which were primarily introduced to regulate E-FBOs. We also analysed it in line with the key challenges and obstacles that E-FBOs might encounter, on their road to ensuring full compliance with the regulations.
In this blog post, we will be analysing the categories of business structures envisaged for E-FBOs as regulated under the 2021 Amendment Regulations and will provide an overview of the key compliances outlined for the same.
Overview of E-FBOs
Inventory-Based Model FBOs
The 2021 Amendment Regulations define “Inventory-based model of e-commerce”[3] as an “e-commerce activity where inventory of food products and food services is owned by the e-commerce FBO and is sold to customers directly”. An inventory-based model may be observed in the operation of quick commerce platforms, which facilitate the sale and delivery of food products from “dark stores” and/ or warehouses, where the food products and other FMCGs are stored. Depending on the business model, such dark stores and warehouses may be operated and licensed by the platforms themselves.
Such platforms usually engage in the packaging, storage, transportation, distribution of food and sale of food or food ingredients. Such activities are regulated in terms of the FSS Act and accordingly, such platforms may need to obtain distribution, storage and sale licenses for their specific premises/ warehouses[4], in addition to the e-commerce FBO central license. Inventory-based model FBOs have additional obligations as such entities usually also need to adhere to the terms and conditions of premise-specific licenses, issued by the authorities, in addition to complying with the e-commerce FBO license terms.
Marketplace-based Model FBOs
The 2021 Amendment Regulations defines “Marketplace based model of e-commerce FBOs”[5] as “provider of an information technology platform by an e-commerce FBO on a digital and electronic network to act as a facilitator between the buyer and seller/ brand owner/ manufacturer. E-commerce marketplace includes entities providing support services to sellers/ brand owners/ product manufacturers in respect of warehousing, logistics, order fulfilment, payment selection, facilitator of delivery and other services”.
Such models are widely seen with the rise of marketplace e-commerce websites and platforms wherein sellers/ brand owners obtain FSSAI licenses for their products and list them on the e-commerce marketplace. Depending on the business model, marketplace e-commerce platforms may facilitate the sale, distribution and transportation of food products from the seller to the end consumer. Marketplace-based model FBOs need to assess whether their business operations are regulated activities in terms of the FSS Act and accordingly, such platforms may need to obtain additional licenses, in addition to the e-commerce FBO central license.
Food Delivery Platforms
Food delivery platforms are new age e-commerce/ digital platforms that facilitate the delivery of food products from restaurants and other food establishments to consumers. Such food delivery platforms usually list the authorised sellers/ restaurants offering food and related products on their platform. In the current Indian landscape, major food delivery platforms operating in India are generally engaged in the sale of food products, last-mile delivery to end consumers, transportation and distribution of food products.
Food delivery platforms do not usually hold food manufacturing/ processing licenses and require brand owners/ sellers of the food products listed on the platform to obtain and maintain food licenses. In terms of the requirements outlined in the FSS Act, read with the 2021 Amendment Regulations, transportation, sale and distribution of food products are regulated activities and accordingly, food delivery platforms may be required to obtain and maintain central e-commerce FBO licenses and ensure continuous compliance with the relevant terms and conditions. Food delivery platforms need to ensure that last-mile delivery is undertaken by trained delivery personnel and safety of the food product is not compromised at the time of delivery.
Key Compliances for E-FBOs under the 2021 Amendment Regulations
The 2021 Amendment Regulations have introduced several important requirements and responsibilities for E-FBOs[6] to ensure food safety and compliance with FSSAI standards. E-FBOs must implement and maintain a robust control system to guarantee the quality of their products or processes. Below are key compliances that E-FBOs must take into account in respect of their business operations:
- Specific testing plans to ensure adherence to FSSAI standards. Additionally, E-FBOs are required to conduct food safety audits by FSSAI-recognised third parties, either independently or as directed by the FSSAI;
- To ensure hygiene and safety, E-FBOs must obtain FSSAI-prescribed hygiene ratings for their food businesses. They are also responsible for training Food Safety Supervisors under FSSAI training programmes. These supervisors oversee the training and performance of food handlers, ensuring high standards are maintained throughout the operation;
- Sellers, brand owners, and manufacturers on e-commerce platforms have specific obligations as well. They must display their FSS Act license or registration and hygiene grading prominently. Moreover, E-FBOs need to sign agreements with these sellers, brand owners, and manufacturers to ensure compliance with the FSS Act, taking on associated liabilities;
- When it comes to pre-packaged foods, sellers, brand owners, and manufacturers must provide clear and legible images of the principal display panels for customers. E-FBOs must also ensure that any food articles delivered to consumers have at least 30% of their shelf life or 45 days remaining before expiry, at the time of delivery. For catering or restaurant services, only fresh food is to be delivered;
- E-FBOs are also tasked with preventing misleading information, false claims, or misleading images of food products on their platforms. If any food products listed on the platform are found to be non-compliant with FSS and food safety standards, E-FBOs must delist them immediately. Furthermore, any complaints regarding product efficacy, quality, or other issues must be communicated by the E-FBOs to the concerned seller or brand owner for quick resolution.
The 2021 Amendment Regulations lay down comprehensive guidelines for FBOs, particularly those operating through e-commerce, to maintain high standards of food safety, hygiene, and transparency, ensuring consumer protection and trust in the food supply chain.
Conclusion
In conclusion, navigating regulatory compliance is a critical aspect of India’s diverse E-FBOs. From stringent hygiene standards to licensing requirements, adhering to these guidelines ensures consumer safety and business sustainability. As the sector continues to grow and innovate, staying abreast of evolving regulatory frameworks will be essential for operators to thrive in this competitive market. E-FBOs should also ensure that they send appropriately detailed replies, along with the relevant documentation in relation to notices received against product claims and advertisement objections from regulators, individuals and private entities. Ultimately, maintaining compliance not only builds consumer trust, but also fosters a conducive environment for the continued growth and success of E-FBOs in India.
For further information, please contact:
Ankoosh Mehta, Partner, Cyril Amarchand Mangaldas
ankoosh.mehta@cyrilshroff.com
[1] In terms of Regulation 2(c) of the 2021 Amendment regulations, “E-commerce FBO” means any Food Business Operator carrying out any of the activities in Section 3(n) of Food Safety & Standards Act, 2006, through the medium of e-commerce.
[2] L-and-R oper content_merged.pdf (fssai.gov.in)
[3] Regulation 2 (d) of the 2021 Amendment Regulations
[4] In terms of Regulation 2.1.2 of the Food Safety and Standards (Licensing and Registration of Food Businesses) Regulations, 2011
[5] Regulation 3(a) of the 2021 Amendment Regulations
[6] Regulation 2.2.2. of the 2021 Amendment Regulations
