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Amazon, Flipkart Likely To Get Hit After India Tightens Its E-Commerce Rules

Amazon India said it is currently evaluating the new rules, while Flipkart did not immediately respond to a request for comment.

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Security guards stand at the reception desk of the Amazon India office in Bengaluru, India, Aug. 14, 2015. VOA

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.

In a statement, the government also said that the companies will be prevented from entering into exclusive agreements with sellers. The new rules will be applicable from February 1.

“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.

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The logo of Amazon, online retailer is seen at the company logistics center in Lauwin-Planque, France. VOA

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 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.

The All India Online Vendors Association (AIOVA) in October filed a petition with the anti-trust body Competition Commission of India (CCI) alleging that Amazon favors merchants that it partly owns, such as Cloudtail and Appario. The lobby group filed a similar petition against Flipkart in May, alleging violation of competition rules through preferential treatment for select sellers.

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Flipkart did not immediately respond to a request for comment.

Wednesday’s notification also said that the cash back that customers get as an incentive while online shopping should not be based on whether the product was purchased from an affiliate of the platform or not.

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.

Backdoor market entry

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.

The Confederation of All India Traders in a statement said that if the order is implemented in full then malpractices, predatory pricing policies and deep discounting by e-commerce players will no longer occur.

 

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It’s important to know how the system as a whole works. Flickr

 

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

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

Also Read: Online Retail Giant Amazon Announces Record Sales For Holiday Season in 2018

The new regulations build on existing rules under which foreign investors can acquire 100 percent of e-commerce companies, with the exception of a model based on inventory from which they are barred.

Amazon India said it is currently evaluating the new rules, while Flipkart did not immediately respond to a request for comment. (VOA)

Next Story

Flipkart Leads $60mn Investment in Logistics Platform Shadowfax

"With the new round of capital infusion, Shadowfax plans to invest extensively in building long-term capabilities which are essential to developing an efficient and superior service quality ecosystem in Indian logistics," said Abhishek Bansal, CEO, Shadowfax

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Flipkart Buys Back Shares Worth $350 mn.
New e-commerce norms to impact e-tailers: Flipkart. IANS

Walmart’s Flipkart has led a $60 million financing round in logistics platform Shadowfax as the online retailer looks to expand hyperlocal delivery capabilities.

This investment is part of a Series D funding that Shadowfax has received from Eight Roads Ventures, Nokia Growth Partners, Qualcomm Ventures, Mirae Asset Naver Fund and World Bank backed IFC.

Flipkart has an existing partnership with Shadowfax to fulfil logistics requirements across various categories in its e-commerce business.

“At Flipkart, we are focused on redefining customer experience, and hyperlocal is a key element to enable this transformation,” Kalyan Krishnamurthy, Chief Executive Officer, Flipkart, said in a statement on Thursday.

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FILE – A worker removes an advertisement billboard of Indian online marketplace Flipkart, installed along the roadside in Mumbai, India, Oct. 16, 2015. Amazon.com Inc. is concentrating on India and its competition, Flipkart. VOA

“We have seen strong synergies with Shadowfax through our existing engagement with them, and their investments in tech-enabled innovations will help us significantly reduce delivery time and provide superior customer experiences across product categories,” Krishnamurthy added.

Founded in 2015, Shadowfax currently enables delivery of 10 million monthly shipments across diverse segments ranging from hot food to grocery to fashion, electronics and other e-commerce items.

Also Read: Delhi’s Air Quality Still Remains ‘Very Poor’

The company will use the funds to enhance the tech capabilities of the platform, recruit talent, increase the number of shipments to 100 million a month and expand its geographical presence to 1,000 Indian cities, Flipkart said.

“With the new round of capital infusion, Shadowfax plans to invest extensively in building long-term capabilities which are essential to developing an efficient and superior service quality ecosystem in Indian logistics,” said Abhishek Bansal, CEO, Shadowfax. (IANS)