To continue operating, Amazon and Walmart will now have to turn their sites in India into platforms for independent merchants.
Amazon and Flipkart, foreign owned e-commerce services will not be able to sell products of the companies in which they have stake and will also be barred from reaching deals with vendors to only sell on one platform, a move they have said will cause ‘significant customer disruption.’
Now, Amazon and Walmart will have to turn their sites in India into platforms for independent merchants.
The commerce and industry ministry order in December last followed complaints by small traders, who form a core support base of the ruling Bharatiya Janata Party (BJP), that the deep discounts offered by e-commerce firms are hurting their business.
Reuters report, Walmart Inc online retailer Flipkart told the government, the company faced the risk of “significant customer disruption” if the implementation of new curbs for e-commerce is not delayed by six months.
In a letter to the industries department earlier this month, Flipkart Chief Executive Kalyan Krishnamurthy said the rules required the company to assess “all elements” of its business operations, according to a person privy to the communication.
“Redesigning numerous elements of our technology systems to ensure that we can validate and evidence our compliance, in such a compressed period of time, has caused us to divert significant resources,” Krishnamurthy wrote in the letter.
The policy move has jolted Walmart, which last year invested $16 billion in Flipkart in its biggest ever deal, and Amazon, which has committed $5.5 billion in India investments.
The new policy would raise compliance costs and force Amazon and Flipkart to review their business arrangements in the country, industry sources said.
Amazon had written to the government to seek an extension of four months. With more than 400,000 sellers and “hundreds of thousands of transactions” daily, Amazon said it needed the time to understand the policy.
Flipkart, in its letter, said the group has more than 80,000 employees and contractors and the number of shipments and packages which move daily were between 500,000 and 600,000.
The new policy “imposes several new conditions, which we believe could potentially have undesirable impacts on the continued growth of e-commerce in India”, Krishnamurthy wrote.
Two officials aware of the development said that the Indian government is also considering on the extention of the restrictions to domestic firms like Snapdeal and Paytm as well to avoid complaints that it is discriminating against online retailers based overseas.
The matter is under consideration at the highest level of the government as pressure mounts on it from two fronts, giant foreign investors and the governments of their country of origin, and millions of small domestic traders, who want curbs on all e-commerce entities, domestic as well as foreign, the officials at two different ministries said on condition of anonymity.