Government Tighten Guidelines For E-Commerce Markets

| December 27 , 2018 , 13:24 IST

The Government tightened the norms for e-commerce platforms like Flipkart and Amazon on Wednesday.

The commerce and industry ministry barred online retailers including Amazon and Flipkart from selling products of companies in which they own stakes and disallowed them from entering into exclusive deals for merchandise.

"An entity having equity participation by e-commerce marketplace entity or its group companies, or having control on its inventory by e-commerce marketplace entity or its group companies, will not be permitted to sell its products on the platform run by such marketplace entity," the ministry said.

The changes in the policy have come against the backdrop of several domestic sellers complaining about deep discounting and alleged discrimination by e-commerce giants.

Small traders have also been complaining about the influence of large e-commerce giants with deep pockets on their businesses and livelihoods.

The government had received complaints that e-commerce players with foreign investments were allegedly flouting existing FDI norms.

The move to ban exclusive deals for products also hurts top online retailers such as Flipkart and Amazon.

Flipkart, for instance, has exclusive partnerships with top smartphone brands such as Xiaomi and Oppo. Smartphones contribute over 50% of overall e-commerce sales in India.

The notification also said that the cash back that customers get as an incentive while online shopping should not be based on whether the product was purchased from an affiliate of the platform or not.

The new rules said that services provided to vendors on an e-commerce platform and by that entity's affiliates should be done so at arm's length and in a fair and non-discriminatory manner.

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The policy, which comes into effect from February 1, made it clear that a vendor will not be permitted to sell more than 25% of its products on an online platform of a single e-marketplace firm.

Atul Pandey, a partner at Khaitan & Co. said that “The DIPP has made the e-commerce policy more comprehensive, insofar as the coverage of marketplace and inventory model is concerned.”.