Marks & Spencer may have to seek nod under multi-brand retail policy

NEW DELHI: UK clothing chain Marks & Spencer may have to seek approval under the multi-brand retail policy to continue to do business in India as its current business model of selling sub-brands does not seem to meet the country’s single brand retail policy.


“There is no legal term as a sub-brand, and hence it is equivalent to multi-brand,” a department of industrial policy and promotion (DIPP) official told ET. The finance ministry has already written to DIPP to clarify if Marks & Spencer’s practice of selling subbrands was in conformity with the FDI policy, the person said. “If they are selling multi-brands they will have to apply for multi-brand licence.”

ET last week reported that Marks & Spencer India, a 51:49 joint venture between the 129-year-old British retailer and Mukesh Ambani-led Reliance Retail, is under scrutiny for FDI policy violation.

An M&S spokesperson, however, said the company has not yet heard from the department. “As we have yet to receive any letters from the DIPP, it would be inappropriate for us to comment,” the spokesperson said. M&S has a range of sub-brands like Limited Collection, Autograph, Collezione, North Coast, Blue Harbour, Savile Row Inspired and Indigo Collection apart from the main M&S brand in its stores in the country. M&S entered India in 2008, and since then has opened 29 stores across the country.

The current policy says products to be sold should be of a ‘single brand’ only, implying that multiple brands owned by the same firm can neither be sold under one roof nor sold by the same entity.

Legal experts say the intent of the policy on sub-brands is clear, but it needs clarity. “Going by the letter of intent, what DIPP is saying is right. Sub-brands are not allowed. But there needs to be clarity on it,” said Diljeet Titus, partner at law firm Titus and Co, who handled Swedish retailer IKEA’s entry into the country.

Hardeep Sachdeva, equity partner at AZB & Partners, too said, “The single-brand FDI policy allows single brand and not a single owner of multiple brands, like in the case of M&S.”

Abhimanyu Bhandari, managing partner at Axon Partners, however, said that asking M&S to reapply through the multi-brand route will be wrong. “Marks & Spencer is a single brand player, whereas the multibrand route is very onerous, which will deter investors to come to India,” he said.

The multi-brand policy imposes many conditions on the retailer, including a certain minimum investment in the back end. Besides, many states have still not opened their doors to multi-brand retailers.

M&S had recently told ET that under its single brand licence in India it only sells M&S products including the sub-brands only available to buy at M&S outlets. India has made several changes to the single brand policy after it decided in November 2011 to raise FDI limit to 100% from 51% after retailers keen to invest in India raised objections.

The Foreign Investment Promotion Board, the interministerial body that approves FDI proposals in the country, has received 63 proposals from single brand retailers since January 2002, when the sector was first opened.