Is India's new draft e-commerce rule against Amazon, Flipkart & others?

The small retailers in India are always known to back the BJP, the ruling party in India now. Little wonder that the BJP government is now thinking of new business rules that would make things tougher for e-commerce behemoths like the Amazon, the Walmart-owned Flipkart.  The previous draft was, as it happened, no different. 

The new draft e-commerce policy, which has been leaked in the media, will require e-commerce firms to treat sellers equally on their platforms and ensure transparency.

“E-commerce operators must ensure equal treatment of all sellers/vendors registered on their platforms and not adopt algorithms which result in prioritizing select vendors/sellers,” the draft rules say.

The government will also restrict large e-commerce marketplaces in their dealings with associates and related parties. The government will regularly notify which parties fall under definition of associates and related parties.

E-commerce platforms with foreign investment will comply with the e-commerce FDI policy, which will supersede the e-commerce policy.

As per existing policy, 100 per cent FDI is permitted in e-commerce entities. But they are prohibited from inventory-based activities.

The new rules, if they get to be implemented, will reportedly hit Amazon, Flipkart, and also Jio Mart.

Amazon, Flipkart and others are often alleged to offer discounts to and cut deals with select sellers on their platforms. Amazon and others have, however, denied these charges.

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Aimed at curbing digital monopolies: Govt

The draft e-commerce policy, the government agrees, is aimed at curbing 'digital monopolies' as it primarily seeks to strike at big discounts, stop exclusive deals with chosen sellers and investing in entities offering products on their websites.

The government also wants to ensure that the data from the Indian market is not shared elsewhere. 

The new policy, which is said to run to 9-pages, is being brought in to “reduce prevalent market distortions" and is a product of brainstorming among various ministries at a meeting called by the Department for Promotion of Industry and Internal Trade (DPIIT) in India’s Ministry of Commerce & Industry.

The draft rules will be shortly made public, and comments would be sought from industry lobby groups, companies and any other related parties.

Draft policy draws criticism

India's e-commerce sector, expected to get past $100 billion in 5 years, has thrown up regulatory challenges to the government with big corporations seeking to dominate the sector with aggressive business practices that directly affect small and medium big and mortar entities.

Indian traders, on the other hand, have often complained about steep discounts offered by online companies which smaller retailers are unable to match. 

Amazon and Flipkart say that they are not doing anything that flouts the local laws.

Though they have not officially responded to the draft rules, the word out from them is that the new policy is discriminatory and anti-business. The major irritant is the one pertaining to the definition of 'related parties' and 'associates'. The fact that the government can change the definition from time-to-time is seen as a lopsided approach.

More meetings in store

Meanwhile, the DPIIT will hold a host of meetings with industry and trader associations this month on issues pertaining to foreign direct investment (FDI) in the e-commerce sector.

A meeting with traders' bodies including, Confederation of All India Traders (CAIT), is scheduled on March 17. Officials of the department would meet other industry associations on March 19.

More deliberations would be had between the relevant ministries and companies engaged in the sector from the week starting from March 22.

It may be recalled that CAIT has often alleged that ecommerce players have violated the Foreign Exchange Management Act and FDI rules. 

The government is clearly caught between the Scylla of local entrepreneurs who want their business to be safeguarded and the Charybdis of aggressive and powerful global e-commerce platforms that don't mind riding roughshod over competition.

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