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 from selling products from companies in which they have an equity interest, according to Reuters. 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. The government said that e-commerce companies can make bulk purchases through their wholesale units or other group companies, which in turn sell the products to select sellers, who could be their affiliates or other companies with whom they have agreements. Those sellers can then sell the products to other companies or directly to consumers at discounted or lower 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.
This new regulation comes into effect after complaints from Indian retailers and traders, who claim that these online retailers are using their control over inventory from their affiliates and through exclusive sales agreements. 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, where it alleged that Amazon favors merchants such as Cloudtail and Appario, where it has its own investment.
The association also filed a similar petition against Flipkart in May, where it alleged the Indian e-commerce player of violating competition rules through preferential treatment for select sellers. The notification issued by the government on Wednesday also notes 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 these e-commerce platform should be fair and done in a non-discriminating manner.
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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.