India clips the wings of ecommerce players

Mumbai, New Delhi – India has tightened rules for foreign investment in e-commerce companies to check predatory pricing and deep discounts that threatened the domestic retail industry.

E-commerce companies like Amazon.com Inc and Walmart Inc.’s Flipkart, which act as a facilitator between the buyer and seller by providing an online marketplace, must treat all vendors equally by providing the same terms, the trade ministry said in a circular. Cash back provided to buyers shall be fair and the company will not influence the price of goods or services.

The new rules will be effective February 1.

The government barred e-commerce companies from forcing a seller to feature products exclusively on their platforms. A certificate confirming the compliance of all rules and an auditor’s note will have to be submitted to the Reserve Bank of India by September 30 every year for the preceding financial year.

Amazon and Flipkart will make presentations before India’s finance and commerce ministries to contest the new rules, local news channel BTVI said in a Twitter post, citing unidentified people.

The move against online retail will help Prime Minister Narendra Modi’s Bharatiya Janata Party win support of local traders — a key voting bloc for the party that suffered defeats in provincial elections this month. The nation is key to global retailers as it has a billion plus population but only a few million of them own smartphones, offering them the opportunity of exponential growth in online consumption.

“It’s a big achievement after a long struggle,” Praveen Khandelwal, secretary general of Confederation of All India Traders, said. “If it is implemented in proper spirit, malpractices and predatory pricing policy and deep discounting of e-commerce players will be a matter of past.”