India To Ban Ecommerce Companies Like Amazon And Walmart

Following complaints from Indian retailers and traders on the e-commerce platforms, India is set to ban Amazon and Walmart from operations in the country from February 1, 2019. The new rules will include preventing them from entering into exclusive agreements with sellers.

A part of the statement read:

“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.”

The traders and retailers had made complaints about the e-commerce companies about using their control over inventory from their affiliates to influence sales decision in the marketplace, thereby compelling them to sell their wares at extremely low prices.  The association, All India Online Vendors Association(AIOVA) filed a complaint in October, accusing the e-commerce giant of creating an unfair marketplace for the vendors.

Accordingly, Amazon allegedly favours vendors or merchants it co-owns over the others, such as Cloudtail and Appario. The same association had in May filed a similar petition against Flipkart on account of giving preferential treatment to selected merchants.

Should the new rules be implemented in full, said the Confederation of All India Traders, “malpractices, predatory pricing policies and deep discounting” e-commerce firms will be silently wiped off.

There have been fears by the sellers that US companies are working to squeezeout and take over brick and mortar shops that dominate retail selling in India, coupled with the existing rules under which foreign investors operate. Foreign investors in India are liable to acquire 100% of e-commerce companies except inventory-based business models.  

Praveen Khandelwal, CAIT’s secretary general has expressed contentment with the new rules. If completely implemented, it will halt the tactics played by the major players to monopolise retail trade in India via e-commerce trade. Walmart already succeeded in acquiring Flipkart at $16b which was a fair deal, enough to create unfair rivalry.

In all, the new rules are in favour of the small traders in India who fear that the US companies are creating a backdoor to kick them out of business. While Flipkart is yet to respond to the new development, Amazon India said it was reviewing the new rules.