India has tightened its rules governing the e-commerce sales in the country. This would mean that any e-com firms will not be allowed to sell products from enterprises where the platform is enjoying an equity stake. This could have its impact on companies like the Walmart-owned Flipkart and Amazon.com in the Indian sub-continent. The amazon marketing agency is also affected due to this. The new rule will become effective from February 1 next year.
No Exclusive Deals
The objective of the latest directive is nothing but slapping a ban on reaching any exclusive deals with sellers. Online retailers could make bulk purchases with the help of their wholesale subsidiaries or any other group enterprises, which sell the products to certain sellers only. This included affiliates or any firms where there is an agreement with e-commerce firms. As a result, the sellers are getting the advantage of offering steep discounts directly to consumers. Alternatively, such deals provide room for attractively low priced products to consumers.
In a statement, the Indian government disclosed that any enterprises having equity stake from retailers or its group subsidiaries or firms with control on its inventory would not be allowed to sell the products on the platform. This included group companies that enjoy inventory control directly or indirectly. The latest announcement could provide some kind of level playing field to others in the same space since the directive is clear that there should be a fair and non-discriminatory manner of play.
The new directive comes after complaints from traders and retailers about big e-com firms using their control on inventory through exclusive deals with the help of their affiliates. As a result, this has created an unfair marketplace enabling them an upper hand to offer products at low prices. In October, the All India Online Vendors Association (AIOVA) petitioned Competition Commission of India, which is an anti-trust body. The organization charged Amazon of favoring merchants where it holds a stake. This included Appario and Cloudtail.
Before this petition, the same group has filed a petition in May against Flipkart charging them of violating competition rules with preferred treatment for certain select sellers. The new rules are meant to calm down the fears of small farmers and traders as they fear that multinational firms from the United States are entering the country through the back door. They believe that such an atmosphere could only hurt the small businesses, which are the dominant force currently.