E-commerce Giants To Resist India’s New Norms

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NEW DELHI — Indian government’s move is expected to further tighten regulations on Amazon.com and Flipkart amid complaints by traders and small businesses that the two dominant e-commerce platforms are flouting local laws.

Amazon.com and Walmart Inc.’s Flipkart unit plan to oppose the new draft e-commerce rules that these companies believe will be detrimental to Indian customers who are increasingly embracing online shopping and the industry’s growth, three people familiar with the matter said.

The two companies plan to write to the government after the ministry of consumer affairs proposed last week a set of new rules—Consumer Protection (e-commerce) Rules, 2020—that are to be implemented after factoring in industry views.

The government’s move is expected to further tighten regulations on Amazon.com and Flipkart amid complaints by traders and small businesses that the two dominant e-commerce platforms are flouting local laws. The proposed rules aim to restrict how e-commerce companies function, including barring affiliated entities from selling on the platforms and restricting flash sales.

The e-commerce giants are already barred from controlling firms that sell on their platform, entering into exclusive arrangements with companies for online sales of products such as smartphones, and discounting goods.

The two also plan to oppose a proposal that foreign products can’t be sold online unless the firm whose product is being sold is registered with the Department for Promotion of Industry and Internal Trade (DPIIT).

Emailed queries sent to Amazon and Flipkart did not elicit any response.

Propelled by rapidly-growing smartphone usage, the Indian e-commerce market is expected to grow more than fivefold to $200 billion by 2026 from $38.5 billion in 2017, according to India Brand Equity Foundation. Flipkart, Amazon, BigBasket, Zomato, Swiggy, Nykaa and Paytm Mall are some of the top e-commerce firms in India.

“The draft rules will jolt the e-commerce ecosystem if implemented. It will not only unfairly hurt the interest of consumers, especially the online population, but also drastically unlevel the playing field between online and offline companies,” said one of the three people cited above.

The draft proposal says the rules will apply to all e-commerce entities that are not established in India. “Every e-commerce entity, which intends to operate in India, shall register itself with DPIIT. Also, no e-commerce entity shall permit usage of the name or brand associated with that of the marketplace e-commerce entity for promotion or offer for sale of goods,” according to the proposed rules.

This means Walmart, the controlling shareholder of Flipkart, can’t sell its branded shirt in India through Flipkart without getting registered with DPIIT.

“It is impractical to ask every company in foreign countries across the globe to get an Indian registration first to be able to sell any product here,” said the legal head of an e-commerce firm, one of the three people cited above.

The definition of e-commerce entity also includes delivery and pickup agents under the proposed rules. “Delivery agents are governed by other Acts. For any issues related to the sales agreement for any product between the customer and the company, the delivery agent cannot be penalized. It is unfair,” the person said.