Will selling a sub-brand come under multi-brand retail or single brand retail?
Global brands are seeking an answer from the Government as many companies have put brakes on bringing sub-brands on their retail shelves.
Marks and Spencer’s, s. Oliver, Zara are among the many global brands which are keen to introduce their sub brands in the domestic markets, but are unsure about the policy definition.
Recently, the Foreign Investment Promotion Board (FIPB) had given its nod to Zara’s sub-brand Massimo Dutti to enter India. The proposal was rejected twice earlier as the Government felt that it exploited the existing Zara Holdings BV structure, in which Tata also owns a 49 per cent stake.
Similarly, Marks and Spencer was also under the Government scanner for allegedly retailing multiple brands under the single brand label.
Law firms representing various global firms have written to the Government seeking clarity on the matter. The Department of Industrial Policy and Promotion has also sought clarification from the Finance Ministry to clearly define the concept of sub-brands.
Official sources on Monday said the Government was still working on the issue and is yet to come out with a clear definition.
Diljeet Titus, Managing partner, Titus and Co, said, “The note has gone to Cabinet and we are expecting a clarification on the same. Most single brand retail has a sub-brand and many are intrinsic to the brand itself. Hence, the two cannot be segregated.”
The current single-brand retail policy allows for brands to retail goods only under one brand name. The policy states that products should be sold under the same brand internationally, i.e., products should be sold under the same brand in one or more countries other than India.
Arpita Mukherjee, Professor at ICRIER said, “Globally no country has a brand-based foreign direct investment policy. It confuses businesses and as long as businesses are confused investments will not come in. The root of the problem is between the operating model and what the Government seeks. Therefore, the policy needs to be streamlined”. Private equity firm BMR in its report said, “We believe that a purposive interpretation should suggest that as long as there is a basic flagship brand under whose aegis, various sub-brands exist as adjunct to the main brand, it should be viewed as falling under the single brand retail category.
“Accordingly, to avoid any ambiguity and misuse of the single brand policy, it is time for the Government to introduce a clear definition. The revised definition may be on the lines that ‘single brand’ would include all products, whose copyrights, trademark or other similar property rights are owned by or licensed by a single retailer.
“The proposed definition should lay the law objectively and should not get affected by the differences in ‘label positioning’ adopted by retail companies,” BMR said.