Flipkart, Amazon Hit as Government Looks to Ban Online Exclusives, Place Other Restrictions

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Flipkart, Amazon Hit as Government Looks to Ban Online Exclusives, Place Other Restrictions

India will ban e-commerce companies like Amazon.com and Walmart-owned Flipkart Group from selling products from companies in which they have an equity interest.

In a declaration, the authorities also said that the companies will be prevented from entering into private agreements with vendors. The rules will be applicable from February 1.

“An entity with equity participation by e-commerce marketplace entity or its group companies, or using control on its stock by e-commerce market entity or its group companies, will not be allowed to sell its products on the stage run by this kind of marketplace entity,” the commerce ministry said in a statement.

E-commerce companies can make bulk purchases through their wholesale components or other group businesses that subsequently sell the goods to pick sellers, such as their affiliates or other companies where they have arrangements.

Those vendors can then sell the goods to other companies or direct to consumers, frequently at attractively low prices.

The regulations follow complaints from Indian retailers and traders, who say the giant e-commerce companies are using their control over stock in their own affiliates, and via exclusive sales agreements, to make an unfair market which allows them to sell some products at very reduced rates.

The reception group filed a similar petition against Flipkart in May, alleging breach of contest rules during preferential treatment for select sellers.

Wednesday’s telling also stated that the money back that customers get as a bonus while online shopping should not be based on if the product was bought from an affiliate of this system or not.

The rules said that services provided to sellers on an e-commerce system and from that thing’s affiliates should be done so at arm’s length and in a fair and non-discriminatory method.

New principles will appease small traders and farmers who fear that U.S. businesses are creating a back door entry into India’s retail market and may squeeze out small corner shops that dominate Indian retailing.

The Confederation of All India Traders in a statement said that if the order is executed in total afterward malpractices, predatory pricing policies and heavy discounting by e-commerce players will no more occur.

CAIT secretary general Praveen Khandelwal said the new rules will place an embargo on the tactics adopted by the international players to control and dominate retail trade in India via e-commerce.

In May, CAIT had raised objections to Walmart’s $16 billion acquisition of Flipkart saying the deal would produce unfair competition and result in predatory pricing.

The new regulations build on existing rules under which foreign investors may obtain 100% of e-commerce businesses, with the exclusion of a model based on stock from which they’re barred.

Amazon India stated it is currently assessing the rules, while Flipkart didn’t immediately respond to a request for comment.

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