India Tightens Selling Models of Foreign E-commerce Platforms

India government recently announced in a statement that e-commerce companies such as Amazon.com and Walmart-owned Flipkart Group are not allowed to sell products from companies in which they have an equity interest. India’s commerce department is also banning e-commerce platforms from making exclusive deals with sellers and all these regulations will take into effect from February 1st.

"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," India commerce ministry said in a statement.

As a result of this decision, retailers such as Cloudtail India may not be able to sell their products on the marketplace run by companies that have ownership in such retailers.

The regulatory changes are in response to the complaints from local 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 new rules say services provided to vendors on an e-commerce platform should be done in a fair and non-discriminatory way, which will appease small traders and farmers who fear that U.S. companies are making an unfair 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, predatory pricing policies and deep discounting by e-commerce players will no longer occur. In May, CAIT had rejected Walmart's $16 billion acquisition of Flipkart, saying the deal would create unfair competition and result in predatory pricing.

Amazon India said it is currently evaluating the new rules, while Flipkart refused to make any comment over the regulation.

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