India has proposed to ban flash sales on e-commerce sites and said on Monday that their affiliates should not be listed as sellers on their platforms, in a proposed tightening of the rules that could hit Amazon and Walmart Flipkart.
The Consumer Department’s rules, which were released in a government statement, come amid complaints from mainstream retailers that foreign e-commerce players are circumventing Indian laws by using complex business structures.
Amazon and Flipkart claim to comply with all Indian laws. Amazon said Monday it was reviewing the draft rules and had no immediate comment, while Walmart’s Flipkart did not respond to a request for comment from Reuters.
Under the stricter proposals, e-commerce companies are not expected to hold flash sales in India. These are extremely popular during the holiday season, but have faced the wrath of offline sellers who say they can’t compete with the big discounts online.
Ecommerce businesses should also ensure that none of their “related parties and associated businesses” are listed as a seller on their shopping websites, and no related entity should sell goods to an online seller. operating on the same platform.
The changes could impact the business structures used by Flipkart and Amazon in India’s rapidly growing e-commerce market, industry sources and lawyers said.
A Reuters investigation in February showed Amazon had given preferential treatment to a small group of sellers for years. Amazon has an indirect stake in two of the top sellers on its website, but says it doesn’t grant any preferential treatment.
Foreign e-commerce players should not sell directly to consumers and can only operate a marketplace for sellers.
Amazon and Flipkart are also regulated by India’s foreign investment rules for e-commerce, and it was not clear whether the rules proposed by the Consumer Department would replace them or not.
The proposal, which applies to Indian and foreign players, is open for public comment until July 6, according to the Indian government statement.
The rules also call on companies to make alternative product suggestions before customers make purchases “to ensure a fair opportunity for domestic products.”
“This proposal fundamentally changes the way e-commerce is structured. It goes way beyond consumer rules – it’s fundamentally like e-commerce sector policy,” said an e-commerce official, adding: ” It will be extremely disruptive. “
Amazon and Flipkart are separately locked in a legal battle with the federal antitrust watchdog to block an investigation into their business practices.
© Thomson Reuters 2021