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India tightens e-commerce rules, likely to hit Amazon, Flipkart

NEW DELHI/MUMBAI (Reuters) – India will ban e-commerce companies such as Amazon.com and Walmart-owned Flipkart Group selling products of the companies in which they have an interest.

A shipment moving on a conveyor belt at an Amazon Fulfillment Center (BLR7) on the outskirts of Bengaluru, India, September 18, 2018. REUTERS/ Abhishek N. Chinnappa

In a statement, the government also said that the companies on the prevention of the conclusion of exclusive agreements with the seller. The new rules will apply from 1 February.

“An entity which holds a participation by the e-commerce market entity or its group, or the control on the inventory of e-commerce market entity or its group companies, will not be allowed to sell its products on the platform are performed by a such market entity,” the commerce ministry said in a statement.

E-commerce companies can bulk buy through their wholesale business units or other companies of the group which, in turn, sell the products, select vendors, such as their subsidiaries or other companies they have agreements.

That seller can then sell the products to other businesses or directly to consumers, often at attractive low prices.

The new regulations follow complaints from the Indian shopkeepers and traders, who say, that the giant e-commerce companies with their control over the inventory of their affiliates, and by the exclusive sale of contracts for the creation of an unfair market, which allows them to sell certain products at very low prices.

The All India Online Sellers Association (AIOVA) in October filed a petition with the anti-trust body Competition Commission of India (CCI) with the assertion that Amazon is in favour of merchants that it partly owns, such as Cloudtail, and Appario. The lobby group filed a similar petition against Flipkart in May, for alleged violation of competition rules by means of a preferential treatment for certain vendors. [nL4N1WO1Y1]

Wednesday notice also said that the cash back that customers get as an incentive during the online shopping should not be based on whether the product is purchased from a partner of the platform or not.

The new rules said that the services of vendors on an e-commerce platform, and by that legal entity affiliates must be done on the arm and in a fair and non-discriminatory manner.

New rules will soothe small traders and farmers who are afraid that the AMERICAN companies are making a back-door entry into India retail market and could squeeze out small corner shops that top the Indian retail sector.

The Confederation of All India Traders in a statement said that if the order is implemented in full, then abuses, predatory pricing, policy, and deep discount e-commerce players will no longer be the case.

Cait secretary-general Praveen Khandelwal said that the new rules will be an embargo on the tactics adopted by the global players to control and dominate the retail trade in India through e-commerce.

In May, cait had objections to Walmart $16 billion acquisition of Flipkart saying that the deal would lead to unfair competition and result in predatory pricing.

The new regulations build on the existing rules under which foreign investors may acquire 100 per cent of the e-commerce companies, with the exception of a model that is based on inventory which they are excluded.

Amazon India said it is currently evaluating the new rules, while Flipkart not immediately respond to a request for comment.

Writing by Nidhi Verma; Editing by Martin Howell

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