Govt declines extension to new e-commerce FDI norms

Some VCs Opine Ecommerce Policy Favouring Large Corporates Report

Govt declines extension to new e-commerce FDI norms

The revised e-commerce rules of Amazon India caused several of its products to disappear from the site late Thursday night. Also, e-commerce firms are now barred from selling products through firms in which they hold an equity stake.

While the government has clarified that there's no "restriction on the nature of products (private labels) sold on the marketplace", but the first two guidelines taken in conjunction imply that Amazon or Flipkart can not sell its own products and private labels.

A clause specifies that entities 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, won't be permitted to sell its products on the platform run by such marketplace entity.

Hours before the February 1 deadline on Thursday, numerous items sold by sellers, such as Cloudtail, in which Amazon holds an indirect equity stake, were no more available on the website.

In addition to the removal of products sold by Amazon vendors like Cloudtail, the company's grocery service, Amazon Pantry, was also discontinued sparking outrage from customers that rely on the site for grocery delivery.

The policy will create new headaches for Walmart which a year ago invested $16 billion for control of home-grown Flipkart, and Amazon which has committed $5.5 billion to India, as both companies would now be forced tweak business structures there.

The U.S. government has also urged India to protect the investments of the two American retailers, Reuters reported last week [1].

India's new e-commerce policy was announced after small traders in the country complained that e-commerce giants were creating an unfair marketplace by exercising their control over inventory from affiliated vendors.

It added that this was the first time in the history of independent India that "the voice of small traders has been heard and acted upon by any Government despite strong and hard lobbying the vested interest e commerce players and US Government".

Industry sources have said the new rules will dent foreign investor sentiment and force the big online retailers to change their business structures, raising compliance costs. Apparently, BPL has slammed the new regulations and added that the company will continue to sell products on Amazon since it's their choice and decision as to where to sell the products.

The development comes after commerce minister Suresh Prabhu gave assurance for rolling out new e-commerce policy.

Clothing from Indian department store chain Shopper's Stop was also no longer available, as Amazon owns 5% of the company.

It was unclear how long the disruption will last.

Though unavailable earlier in the day, by noon on February 1, the stocks of Amazon's in-house devices including smart speaker Echo and its variants and Fire TV stick made a comeback, being sold through multiple sellers such as Estore Mall, Hariom Communication LLP and others.

Latest News