E-commerce companies such as Flipkart Group owned by Walmart and Amazon.com will be banned by India for selling products that have equity interest.
The government said in a statement that the companies will not be allowed to enter into an exclusive agreement with the sellers. These rules will be made applicable from 1 February next year. In a statement, the commerce ministry said,
An entity having equity participation by e-commerce marketplace entity or its group companies, or having control on its inventory by e-commerce marketplace entity or its group companies, will not be permitted to sell its products on the platform run by such marketplace entity.
The e-commerce companies will be allowed to make bulk purchases through their other group companies or wholesale units which further sell the products to particular sellers including their other companies or affiliates with whom they have agreements.
Those sellers have the option to further sell the products to other companies and even direct them to consumers, most of the times at low prices. As per the new regulations, complaints will be followed from Indian traders and retailers. The control over inventory from their affiliates is used by the e-commerce companies. Also, with further use of exclusive sale agreements, an unfair marketplace is created which allows the sale of products at very low prices.
In October, a petition was filed by the All India Online Vendors Association (AIOVA) and Competition Commission of India. As per the petition, the Amazon favors merchants were alleged to partly own Appario and Cloudtail. A similar petition was filed by the lobby group against Flipkart earlier.
The new rules also mention that the services must be provided to the vendors in a non-discriminatory and fair manner on the e-commerce platform. Farmers and small traders who feared the entry of U.S. companies trying to enter India’s retail market from the back door will be appeased by the new rules.
Source: Reuters, CNBC
