India proposed banning flash sales on e-commerce websites and their affiliate entities should not be listed as sellers on their platforms, in a proposed tightening of rules that could hit Amazon and Flipkart.
The Ministry of Consumer Affairs’ rules, which were released in a government statement, come amid complaints by brick-and-mortar retailers that foreign e-commerce players bypass Indian laws by using complex business structures.
Amazon and Flipkart say they comply with all Indian laws. Amazon has said it was reviewing the draft rules and had no immediate comment, while Walmart-owned Flipkart did not respond to a request for comment.
Under the stricter proposals, e-commerce companies should not hold flash sales in India. These are hugely popular during festive season, but have faced anger among offline sellers who say they cannot compete with the deep discounts online.
E-commerce businesses must also ensure that none of their “related parties and associated enterprises” are listed as sellers on their shopping websites, and no related entity should sell goods to an online seller operating on the same platform.
The changes could impact business structures used by Flipkart and Amazon in the fast growing Indian e-commerce market, industry sources and lawyers said.
An investigation by journalists at our partner news agency, Reuters showed Amazon had given preferential treatment to a small group of sellers for years. Amazon holds an indirect stake in two of the top sellers on its website, but says it does not give any preferential treatment.
Foreign e-commerce players must not make direct sales to consumers, and can only operate a marketplace for sellers.
Amazon and Flipkart are also regulated under India’s foreign investment rules for e-commerce, and it was not clear if the proposed consumer ministry rules will supersede them or not.
The proposal, which is applicable to both Indian and foreign players, is open for public consultation until the 6th of July, the Indian government statement said.
The rules also call on companies to make suggestions of alternative products before customers make purchases “to ensure a fair opportunity for domestic goods.”
“This proposal basically changes the way e-commerce is structured. This is way beyond consumer rules – this is basically like an e-commerce industry policy,” one e-commerce executive said, adding: “It will be extremely disruptive.”
Amazon and Flipkart are separately locked in a court battle with federal antitrust watchdog to stall an investigation into their business practices.
The team at Platform Executive hope you have enjoyed the ‘India plans tighter e-commerce rules amid complaints‘ article. Automatic translation from English to a growing list of languages via Google AI Cloud Translation. Initial reporting via our official content partners at Thomson Reuters. Reporting by Jonathan Landay. Editing by Steve Orlofsky.
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