India tightens e-commerce rules, likely to hit Amazon, Flipkart

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(Source: Reuters | December 27, 2018)

The Indian government will ban e-commerce companies from selling products from companies in which they have an equity interest as well as prevent them from entering into exclusive agreements with sellers starting 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.

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.

New rules will appease small traders and farmers who fear that U.S. companies are making a back door entry into India’s retail market and could squeeze out small corner shops that dominate Indian retailing.

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