Amazon and Flipkart facing Government tightening and Banning their Exclusive Product

India will ban e-commerce companies such as Amazon.com and Walmart-owned Flipkart Group from selling products from companies in which they have an equity interest.
Amazon and Flipkart facing Government tightening and Banning their Exclusive Product

The new regulations follow complaints from Indian retailers and traders, who say the giant e-commerce companies are using their control over inventory from their affiliates, and through exclusive sales agreements, to create an unfair marketplace that allows them to sell some products at very low prices.

"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 commerce ministry said in a statement.

E-commerce companies can make bulk purchases through their wholesale units or other group companies that in turn sell the products to select sellers, such as their affiliates or other companies with which they have agreements.

Those sellers can then sell the products to other companies or direct to consumers, often at attractively low prices.

The retailers have accused Amazon and Flipkart of creating an unfair marketplace allowing them to sell some products at low retail price. The All India Online Vendors Association (AIOVA) filed a petition with the Competition Commission of India (CCI) in October.

The AINOVA in October filed a petition with the anti-trust body CCI alleging that Amazon favours merchants that it partly owns, such as Cloud tail and Appario.

The new rules said that services provided to vendors on an e-commerce platform and by that entity's affiliates should be done so at arm's length and in a fair and non-discriminatory manner.

New rules will appease small traders and farmers who fear that U.S. companies are making a backdoor entry into India's retail market and could squeeze out small corner shops that dominate Indian retailing.

Amazon, the Seattle-based e-commerce company and its Indian rival Flipkart, owned by US retail giant Walmart, are facing a new hurdle in India. Both the companies are facing a new ban on selling products from companies. The government, in a statement, said that these companies will also be prevented from entering into exclusive agreements with sellers.

The new rules are set to come into effect starting February 1, 2019.

"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 commerce ministry said in a statement.

On Wednesday it was also noted that the Cashback offered to customers should not be based on whether the product was purchased from an affiliate or not. These new rules dictate that the services provided to vendors on this e-commerce platform should be fair and done in a non-discriminating manner.

 The notification has been welcomed by the Confederation of All India Traders who said that if the order is implemented in full then malpractices, predatory pricing policies and deep discounts offered by e-commerce platforms will no longer be the case.

These regulations basically build on existing rules where foreign investors can acquire 100 percent of e-commerce companies. Amazon India said that it is evaluating these rules but Flipkart is yet to offer comment on these new regulations.

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