India says not extending February 1 deadline for e-commerce regulations


The government said on Thursday that it would not extend the February 1 deadline for implementation of revised FDI or foreign direct investment norms for e-commerce firms.

The All India Online Vendors Association, a group of about 3,500 online sellers, has accused both Flipkart and Amazon of using their dominant position to favour selected sellers.

New Delhi has not allowed FDI in inventory-driven models of e-commerce.

This means that let's say if Flipkart invested in a company "X", it will not be allowed to sell the product of this company "X" on Flipkart as it would give X competitive advantage. The new policy in the e-commerce sector bars companies from selling products of sellers in which they have equities.

According to CRISIL Ratings, these rules will cause both Amazon and Walmart-owned Flipkart revenue losses amounting to 40 percent by 2020 - about $5 billion each. Amazon and Flipkart have already written to the government stating that they need more time to understand the details of the framework.

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Flipkart said it doesn't violate this rule as it holds no stake in any of its vendor entities such as WS Retail or Omnitech Retail. 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. As per the revised guidelines, a vendor can not procure more than 25 percent of products from group companies of the same marketplace where they intend to sell them.

Flipkart seemed to have expressed displeasure on the rules as well, however, they agreed to comply. Amazon also owns a minority stake in the parent companies of Cloudtail and Appario, even though it does not have a direct stake on either of the two sellers.

Also, the 25 percent restriction wouldn't enable a vendor to purchase more than 25 percent from the wholesale arms of e-commerce entities. Experts feel eBay's relaunch is among the hundreds of online marketplaces that could enter India's online market, especially ones that suffered or shut shop due to the deep discounting strategy offered by heavily funded online platforms. Consequently, numerous Amazon's private label products have already been taken off from the company's India website. If so, Amazon, Walmart and other foreign businesses looking to expand in the country will have to change their business structures in order to be in compliance with the new rules. The LG V40 ThinQ, which was also launched in India as an exclusive, is no longer available either.

Mint reported on 29 December that the threat of job losses in the supply-chain network has emerged as a major concern following the announcement of new FDI guidelines that seek to tighten rules for e-commerce companies.

Providing such services to one seller and not to others in similar circumstances would be deemed as unfair and discriminatory, according to the rules.