E-Commerce Gaints say Indian govt e-commerce rules will hit businesses: Report

Amazon.com Inc and India’s Tata Group cautioned government officials on Saturday that proposed stricter regulations for online retailers would have a significant impact on their business models, according to four sources familiar with the discussions.

Many executives expressed concerns and misunderstanding about the new guidelines during a meeting organised by the consumer affairs ministry and the government’s investment promotion arm, Invest India, and requested that the July 6 deadline for submitting comments be extended, according to sources.

The government’s stringent new e-commerce rules, unveiled on June 21, have alarmed the country’s online merchants, particularly market leaders Amazon and Walmart Inc’s Flipkart.

New rules limiting flash sales, prohibiting misleading advertisements, and requiring a complaints system, among other proposals, could force Amazon and Flipkart to restructure their business models, while potentially increasing costs for domestic rivals such as Reliance Industries’ JioMart, BigBasket, and Snapdeal.

Amazon contended that COVID-19 had already had a significant impact on small businesses and that the proposed rules will have a significant impact on its sellers, saying that certain sections were already covered by existing legislation, two sources said.

The sources requested anonymity due to the nature of the discussions.

According to the new guideline, e-commerce firms must verify that no connected businesses are featured as merchants on their websites. This might have a significant influence on Amazon, given the company indirectly owns at least two of its sellers, Cloudtail and Appario.

On that proposed clause, a representative of Tata Sons, the holding company for India’s $100 billion Tata Group, argued that it would be problematic, citing an example in which it would prevent Starbucks – which has a joint venture with Tata in India – from offering its products on Tata’s marketplace website.

According to two sources, the Tata CEO stated that the laws will have a broad impact on the group and may restrict sales of its private brands.

Tata did not respond to a request for comment.

According to the sources, a consumer ministry official stated that the laws were intended to safeguard consumers and were therefore less stringent than those in other nations. A request for comment from the ministry went unanswered.

Although a Reliance official agreed that the proposed guidelines would increase consumer confidence, he stressed that several provisions needed clarity.

Reliance declined to answer on a request for comment.

The measures were introduced last month in response to mounting accusations from India’s brick-and-mortar merchants that Amazon and Flipkart exploit sophisticated business structures to circumvent foreign investment law. Both firms vigorously deny any wrongdoing.

In February, Reuters highlighted Amazon papers that revealed the company granted preferential treatment to a tiny number of its merchants and circumvented foreign investment restrictions. Amazon has stated that it does not favour any merchant.

Indian commerce minister Piyush Goyal told reporters on Friday that the government will soon give clarifications to the country’s foreign investment guidelines.

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Krishna Rath is a SEBI Registered Investment Adviser, and since 2015 has been educating netizens on investments and insurance. Krishna is a fee only SEBI RIA and is Odisha's first SEBI RIA. With background in IT, Krishna is changing the advisory space with new innovations in AdvisoryTech.

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