Senior industry sources told Reuters that India’s new e-commerce rules will increase costs for all online retailers, especially Amazon and Walmart’s Flipkart, because they may have to review their business structure.
The Ministry of Consumer Affairs of India outlined plans on Monday that include restricting online retailers’ “flash sales”, controlling the promotion of private brands, forcing them to appoint compliance officers, and imposing “backup responsibilities” in the event of negligence by sellers.
The new rules are expected to have a full impact on the e-retail market. India predicts that by 2026, its value will reach US$200 billion (approximately Rs 14,848 crore). Participants include BigBasket from Tata, JioMart from Reliance Industries and SoftBank The supported Snapdeal works with market leaders Amazon and Flipkart.
These rules are the latest in an increasingly fierce confrontation between American technology giants and New Delhi on a series of policy-related issues that some people regard as protectionism.
“These rules will have a broader impact on all forms of e-commerce and will increase business costs. Entities, even entities other than large corporations, are analyzing the policy and will share concerns with the government,” Indian law firm Partner Arjun Sinha The Associated Press and partners told Reuters.
The two companies must respond to the proposal by July 6, after which it may further review or implement it.
Snapdeal said it is reviewing the rules. BigBasket declined to comment. Reliance did not respond to a request for comment.
One aspect of the proposed new rules that may have a special impact is that if a retailer displays imported goods for sale, it will provide customers with “alternative suggestions to ensure that domestic goods have a fair opportunity.”
Salman Waris, a partner at TechLegis Advocates, said: “The concept is about promoting local products. This is good for products made in India, but it’s not good for the platform.”
Waris added that if these rules are not followed, they may be sentenced to imprisonment and a fine of at least 25,000 Indian rupees under India’s consumer law.
A notice from the Indian government on Monday detailing these rules stated that the rules were issued after complaints about “fraud and unfair trade practices that are prevalent in the e-commerce ecosystem.”
It did not name any company.
These rules may cause even greater setbacks for Flipkart and Amazon because they contain provisions that require e-commerce companies to ensure that their related businesses are not listed as sellers on their shopping sites, and any affiliated entities are not allowed to sell products to online sellers Operate on its platform.
Amazon indirectly holds shares in its two top sellers.
Indian retailers claim that Amazon and Flipkart use their wholesale department to indirectly list products on their websites through specific sellers, bypassing foreign investment restrictions that prohibit direct sales.
Both companies have denied any wrongdoing.
Two industry sources said that Amazon and Flipkart may oppose these proposals.
According to sources, this rule is seen by some in the industry as the government’s replacement of stricter foreign investment laws, which restrict Flipkart or Amazon’s business arrangements with sellers.
“The Department of Consumer Affairs has nothing to do with the issues under these rules,” said an e-commerce executive.
Amazon said in a statement that online markets promote competition and increase transparency, adding that it is reviewing the draft policy and it is too early to comment.
Flipkart did not respond to a request for comment.
A February investigation by Reuters cited Amazon documents showing that Amazon offered preferential treatment to a small number of sellers and used them to bypass federal laws, triggering calls for a ban on the company. Amazon has stated that it will not give any sellers preferential treatment.
© Thomson Reuters 2021