Amazon hit badly by new India e-commerce rules

Amazon hit badly by new India e-commerce rules

The government snuffed out any hopes of deferring the implementation of new foreign investment rules in e-commerce, dealing a huge blow to Flipkart and Amazon India that have been lobbying furiously to get the new regulations postponed or scrapped entirely.

In December previous year, the government tightened norms for FDI-funded ecommerce companies including Flipkart and Amazon and said such entities can not exercise ownership or control over inventory. The rules, which kick in on Friday, do not allow e-commerce sites to "exercise ownership or control over the inventory" of sellers.

In the build-up to the February 1 deadline, Amazon had sought a deferment of four months while Flipkart is said to have proposed a six-month extension.

The new e-commerce investment rules prohibit online retailers from selling products from vendors in which they have an equity interest and making deals with sellers to sell exclusively on a platform is no longer allowed as well.

Earlier this week, domestic e-commerce firms Snapdeal, Shopclues, Shop101, Limeroad, Wooplr, and Fynd had written to the DIPP and Commerce Minister Suresh Prabhu opposing the deadline extension.

The company's main goal is to minimize the impact of the new e-commerce rules on customers and sellers, he added. In the new policy, the Commerce Ministry also noted that the online retail firms will not directly or indirectly influence sale price of goods and services and will maintain level playing field.

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Flipkart seemed to have expressed displeasure on the rules as well, however, they agreed to comply. They offer high discounts on a number of products and create an unfair market place. Hours before the Thursday deadline, numerous items sold by seller Cloudtail were removed from Amazon's website, as the company owns indirect stake in Cloudtail.

Batting for the players, the US-India Strategic Partnership Forum (USISPF) had dubbed the new e-commerce rules as "regressive" and said these changes would harm consumers, create unpredictability and have a negative impact on the growth of online retail in India.

One of the clauses in the press note states that the inventory of a vendor will be seen as controlled by a marketplace, if over 25 per cent of the vendor's purchases are from the marketplace entity, including the latter's wholesale unit.

Both Amazon and Wal-Mart have taken a major bet on the Indian growing markets. The LG V40 ThinQ, which was also launched in India as an Amazon.in exclusive, is no longer available either.

"There won't be one or two parties that make up the entirety of the Indian ecommerce opportunity and we certainly intend to have a share of it", Wenig said at an investors call on Wednesday.

E-commerce platforms are supposed to act as a market to connect buyers and merchants, not as inventories. They must provide services such as warehousing, logistics and advertising to all sellers in a fair manner.

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