Analysis: India e-commerce rules cast cloud over Amazon, Walmart and local rivals

Altex Industries

23/06/2021 24:30

(Repeats with no changes to text)
    * Indian government published proposals on Monday
    * FACTBOX on the proposed new e-commerce rules: click here https://www.reuters.com/business/indias-new-e-commerce-rules-that-could-jolt-foreign-local-players-2021-06-22
    * India's e-retail market forecast to be $200 bln by 2026

    By Aditya Kalra
    NEW DELHI, June 22 (Reuters) - New Indian e-commerce rules
will raise costs for all online retailers but particularly
Amazon  AMZN.O  and Walmart's  WMT.N  Flipkart as they may have
to review their business structures, senior industry sources
told Reuters. 
    India's Ministry of Consumer Affairs outlined plans on
Monday which include limiting "flash sales" by online retailers,
reining in a private label push, compelling them to appoint
compliance officers and impose a "fall-back liability" if a
seller is negligent. urn:newsml:reuters.com:*:nL2N2O31ST
    The new rules are expected to have an impact across the
board in an e-retail market India forecasts will be worth $200
billion by 2026, with players including from Tata's BigBasket,
Reliance Industries'  RELI.NS  JioMart and Softbank-backed
Snapdeal to market leaders Amazon and Flipkart.
    The rules are the latest in a growing confrontation https://www.reuters.com/world/india/frequent-run-ins-with-india-govt-cloud-us-tech-expansion-plans-2021-06-11
 between U.S. tech giants and New Delhi over a host of
policy-related issues which are seen by some as protectionist.  
    "The rules will have a wider impact on all forms of
e-commerce and will increase business costs. Entities, even
beyond big players, are analysing the policy and will share
concerns with the government," Arjun Sinha, a partner at Indian
law firm AP & Partners, told Reuters.
    The companies have until July 6 to respond to the proposals,
after which time they may be reviewed further or implemented.
    Snapdeal said it was reviewing the rules. BigBasket declined
to comment. Reliance did not respond to a request for comment.
    One aspect of the proposed new rules which is likely to have
a particular impact is one which gives the customer "suggestions
of alternatives to ensure a fair opportunity for domestic goods"
if a retailer is showing imported goods for sale.
    "The concept is about promotion of local goods. It's good
for Made-in-India products, but not for the platforms," said
Salman Waris, a partner at TechLegis Advocates.
    Non-compliance with the rules, if implemented, could be
punishable with prison terms, and fines of at least 25,000
Indian rupees under the India's consumer law, Waris added. 
    
    'WIDESPREAD CHEATING' 
    Monday's Indian government notification detailing the rules
said that they were being issued after complaints of "widespread
cheating and unfair trade practices being observed in the
e-commerce ecosystem." 
    It did not name any company.      
    The rules potentially present a bigger setback for Flipkart
and Amazon, as they contain clauses that say e-commerce firms
must ensure none of their related enterprises are listed as
sellers on their shopping websites, and that no affiliate entity
should sell goods to an online seller operating on its platform.
    Amazon holds an indirect stake in two of its top sellers.
    Indian retailers allege that Amazon and Flipkart use their
wholesale units to indirectly list products on their websites
through select sellers, bypassing foreign investment
restrictions that prohibit direct sales. 
    Both companies deny any wrongdoing. 
    Amazon and Flipkart are likely to push back against the
proposals, two of the industry sources said.
    The rules were seen by some in the industry as a government
alternative to a more stringent version of its foreign
investment law, which restricts business arrangements Flipkart
or Amazon can have with sellers, the sources said. 
    "The Consumer Affairs ministry has nothing to do with issues
brought under these rules," one e-commerce executive said. 
    Amazon said in a statement that online marketplaces promote
competition and enable transparency, adding that it was
reviewing the draft policy and it was too early to comment. 
    Flipkart did not respond to a request for comment.
    A Reuters investigation https://www.reuters.com/investigates/special-report/amazon-india-operation
 in February cited Amazon documents that showed it gave
preferential treatment to a small number of its sellers and used
them to bypass federal law, sparking calls for a ban against the
company. Amazon has said it does not give favourable treatment
to any seller. 

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FACTBOX-India's new e-commerce rules that could jolt foreign,
local players     urn:newsml:reuters.com:*:nL3N2O41NH
India plans tighter e-commerce rules amid complaints over
Amazon, Flipkart     urn:newsml:reuters.com:*:nL2N2O31ST
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Aditya Kalra in New Delhi; Editing by Euan Rocha
and Alexander Smith)
 ((aditya.kalra@tr.com; +91-11-49548021; Twitter @adityakalra;))