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Amazon, Walmart face hit from new India e-commerce rules
NEW DELHI, Dec 27, 2018 (BSS/AFP) – Traditional traders and local players
rejoiced Thursday at new e-commerce rules imposed by the Indian government on
global giants such as Amazon and Walmart which analysts said could force them
to rethink their Indian operations.
Under the surprise restrictions, e-commerce companies are banned from
selling products from firms in which they have a stake. They are also
forbidden from entering into exclusive deals with sellers.
The rules, which come into force on February 1, will particularly hit
Amazon, which has invested billions of dollars in its India operation, and
Flipkart, which was taken over this year by another US giant, Walmart.
The government acted in response to complaints from brick and mortar
retailers that e-commerce giants were unfairly selling products at discount
prices.
Indian law already prevents foreign-owned companies from selling directly
on their internet sites.
So the e-commerce companies have been buying in bulk and then selling the
products to favoured vendors. These then resell the products at discount on
the e-commerce sites who legally remain intermediaries.
Amazon and Walmart, which in May bought a 77 percent stake in Indian
company Flipkart for $16 billion, will be worst hit by the new rules. Neither
has made a public reaction.
Snapdeal, one of India’s biggest Internet shopping sites, said the changes
would enable a level playing field for all sellers.
“Marketplaces are meant for genuine, independent sellers, many of whom are
MSMEs (Micro, small and medium enterprises),” Snapdeal founder Kunal Bahl
said on Twitter.
The Confederation of All India Traders (CAIT) said the new policy would end
discounting wars between e-retailers.
It would also check big companies from using “the policy of exclusivity,
predatory pricing and deep discounting” to their advantage, CAIT secretary
Praveen Khandelwal told AFP.
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The new rules will start on February 1 when the nationalist government of
Prime Minister Narendra Modi announces its interim budget ahead of a general
election due by May.
Analysts said the rule would have a major impact on the business models
built up over the the last five years by the US giants as they make inroads
in India’s growing market.
“Amazon, Walmart and other players with their India investments will have
to rethink their business strategies,” Satish Meena from Forrester Research
told AFP.
“Consumers will face the brunt and prices will go up while available
options will go down.”
The Indian government has in the past two years sought to strengthen home-
grown enterprises against foreign competition.
It has told credit card companies such as Visa, American Express and
Mastercard that all information on Indians must be stored on India-based
computers.
The government has also proposed limits on what internet giants can do with
personal data.
It recently proposed that the WhatsApp messaging app break its trademark
encryption which guarantees private communications between users. The
Facebook-owned firm has fiercely resisted the calls.
BSS/AFP/SR/1830 HRS