
Introduction
India’s food industry is experiencing a digital revolution, with E-Commerce Food Business Operators[1] (“E-FBOs”) transforming the way food and related services/ products are being ordered, consumed and experienced. From local restaurants and cafes offering delivery through mobile applications, cloud kitchens serving gourmet meals, groceries delivered within minutes, the E-FBO landscape is brimming with innovation and opportunity. However, this digital transformation is not without regulatory challenges that E-FBOs must navigate to ensure compliance and maintain consumer trust.
In India, the central regulatory authority for food business operations is the Food Safety and Standards Authority of India (“FSSAI”), which along with its state counterparts is empowered under the Food Safety and Standards Act, 2006 (“FSS Act”), along with the accompanying rules, regulations and guidelines to regulate the food industry, set standards that ensure safety and quality of food products. For E-FBOs, adhering to these regulations can be particularly challenging. They must balance the fast-paced nature of online food delivery with stringent safety standards, licensing requirements, and evolving consumer expectations. As E-FBOs strive to meet these demands, they encounter unique hurdles such as ensuring the quality of food during transit, managing customer data privacy, and integrating traditional food safety practices with cutting-edge technology.
In this blog, we will delve into the specific regulatory challenges faced by India’s E-FBOs, explore the critical regulations impacting the sector and common compliance issues. Under the FSS Act, the operation of a food business[2] encompasses any organisation, regardless of profit motive or ownership type, involved in any stage of the food supply chain. This includes activities such as manufacturing, processing, packaging, storage, transportation, distribution, importing, as well as food services, catering, and the sale of food or food ingredients.
Food E-Commerce Operations: 2021 Amendment[3]
The FSSAI re-operationalised the FSS Licensing and Registration of Food Businesses Amendment Regulations, 2021 (“2021 Amendment Regulations”), with effect from November 11, 2023, to promote food safety and ensure fair practices in e-commerce food business operations. According to the FSSAI notice dated June 5, 2024[4], Food Business Operators (“FBOs”) must comply with the 2021 Amendment Regulations. It is interesting to note that while FBOs are obligated to comply with the 2021 Amendment Regulations, any enforcement by the authorities will only commence following the notification in the Gazette of India, with certain exceptions.
The 2021 Amendment Regulations define “E- FBOs” as those conducting activities outlined in Section 3(n) of the FSS Act through e-commerce. E-commerce[5], in this context, means buying and selling goods and services over digital and electronic networks. E-FBOs are required to obtain a central e-commerce license[6] under the 2021 AmendmentRegulations. However, e-commerce entities that only provide a listing or directory of FBOs or food products are exempt from this requirement, provided they do not engage in the activities listed in Section 3(n) of the FSS Act.
Further, the 2021 Amendment Regulations identify E-FBOs[7] as:
- E-commerce platforms that list sellers, brand owners, manufacturers, or restaurants, offering a commercial marketplace;
- Sellers, brand owners, manufacturers, vendors, importers, processors, or packagers who display or sell their food products, including food services and catering, through market-based or inventory-based e-commerce models;
- Businesses that operate and provide storage and/ or distribution services for sellers, brand owners, vendors, importers, or manufacturers of listed food products; and
- Companies that offer transportation services to sellers, brand owners, vendors, importers, or manufacturers of food products, including last-mile delivery to consumers.
Moreover, the terms “sellers/ brand owners/ manufacturers” refer to entities responsible for listing their products or offerings on the e-commerce platform, visible to the end consumer as the ‘seller’ of the product or service.
Key Challenges and Roadblocks in the E-Commerce Food Business
Based on publicly available information and news reports, we have stated hereinbelow major challenges, incidents and lapses in compliance, which affect business operations of FBOs. It is crucial to note that the current prescribed penalties for contraventions/ non-compliance include hefty monetary fines to imprisonment. Further, the FSSAI has filed multiple cases against FBOs for violations such as carrying out trade without a valid license or for manufacturing/ selling unsafe food, etc.
- Restaurants/ cafes, listed with major food delivery apps, lack registration with the FSSAI, and hence, safety standards are not maintained as per the FSS regulatory framework;
- Lack of enforcement of internal standards of procedures (“SOPs”) and obligations to conduct frequent checks by food delivery platforms;
- FSSAI inspections and lack of continuous compliance with safety standards issued by the FSSAI within its regulatory framework;
- Unlicensed FBOs that are manufacturing or selling unsafe food;
- Cases filed against e-commerce FBOs for misleading claims in contravention of the FSS Act, read with the Food Safety and Standards (Advertising and Claims) Regulations, 2018;
- Consumer complaint lodged after discovering a finger in ice cream. Following an investigation, it was revealed that the finger belonged to an employee who had been injured at the manufacturer’s factory. In response, the FSSAI suspended the license of the manufacturer;
- During an inspection of a restaurant in Hyderabad, a food safety officer obtained raw materials that were expired and improperly labelled;
- A 10-year-old girl from Patiala, Punjab, lost her life after consuming an expired and contaminated cake;
- An airline passenger found a sharp object resembling a blade in his (served) meal;
- In Gujarat’s Jamnagar, a consumer discovered a dead frog in a packet of wafers. The brand’s representative refuted the claim, asserting that their manufacturing process incorporates rigorous quality control measures. Investigation is underway;
- A consumer discovered a dead mouse in a chocolate syrup bottle, ordered through a quick commerce platform, but the brand’s representative refuted the claims by stating that their product goes through rigorous quality control checks;
- A Gurgaon-based person started coughing blood after ingesting a substance mistaken for a mouth freshener, identified as solid carbon dioxide or dry ice;
- A consumer at a restaurant discovered multiple rodents in the food that was served to her; and
- A passenger in a train discovered live cockroaches in his (served) meal.
Conclusion
While India’s E-FBO sector offers tremendous growth and innovation opportunities, it is not without significant challenges that need to be navigated carefully. Compliance with stringent regulations like the FSS Act and the 2021 Amendment Regulations, require substantial effort and resources. Ensuring food safety, maintaining high hygiene standards, and managing the logistics of food delivery are just a few hurdles that E-FBOs must overcome. Moreover, the responsibilities of preventing misleading information and resolving consumer complaints swiftly add another layer of complexity to their operations. The need to continuously train personnel and implement robust quality control systems further underscores the demanding nature of this industry. Despite these challenges, the online food business landscape in India remains extremely dynamic and promising. With the right strategies, adherence to regulatory requirements, and a focus on consumer satisfaction, E-FBOs can not only meet these challenges, but also thrive in this dynamic market.
[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] In terms of Section 3(n) of the FSS Act, “food business” is defined as “any undertaking, whether for profit or not and whether public or private, carrying out any of the activities related to any stage of manufacture, processing, packaging, storage, transportation, distribution of food, import and includes food services, catering services, sale of food or food ingredients”.
[3] L-and-R oper content_merged.pdf (fssai.gov.in)
[4] 666004236ddd8Direction_Re-operationalization_Licensing.pdf (fssai.gov.in)
[5] In terms of Regulation 2(b) of the 2021 Amendment Regulations, “E-commerce” means buying and selling of goods and services over digital and electronic network.
[6] Regulation 2.2.1 (1) of the 2021 Amendment Regulations.
[7] Explanation to Regulation 2.2.2 of the 2021 Amendment Regulations.