India banned E-commerce companies from selling their own goods

India banned E-commerce businesses such as Amazon and Walmart-owned Flipkart from selling products coming from companies in which they have a great equity interest.

In a declaration, the government also said that the businesses will be prevented from getting into exclusive agreements with retailers. The new rules will be relevant from February 1.

“An entity having equity involvement by e-commerce marketplace organization or its group firms, or having control upon its inventory by web commerce marketplace entity or the group companies, will not be allowed to sell its products on the system run by such marketplace entity, ” the business ministry said in an assertion.

E-commerce companies can make mass purchases through their low-cost wholesale units or other group companies that in turn offer the products to select sellers, including their affiliates or others with which they have agreements.

All those sellers can then sell the items to other companies or immediately to consumers, often at attractively low prices.

The new rules follow complaints from Indian traders and retailers, who also say the giant e-commerce businesses are using their control over inventory using their affiliates, and through unique sales agreements, to create a great unfair marketplace that allows these to sell some products for very low prices.

Then retailer’s All India Online Vendors Relationship (AIOVA) in October submitted a petition with the anti-trust body Competition Commission of India (CCI) alleging that Amazon favours merchants it partly owns, such as Cloudtail and Appario. The reception group also filed a similar complaint against Flipkart in May, alleging a violation of competition guidelines through preferential treatment intended for select sellers.

Wednesday’s notice also said that the cash back received by the customer as an incentive while shopping online must not be based on whether the product was purchased from an affiliate of that platform or not.

The brand new rules said that services offered to vendors on an e-commerce platform and by that entity’s affiliates should be done so by arm’s length and in a reasonable and nondiscriminatory manner.

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These Fresh rules will appease all those little traders and farmers who fear that U. S. companies are again entering into India’s retail market through a back door and could squeeze away all small corner shops that dominate Indian retailing.

The Confederation of All India Traders also in a statement said that in this event if this order is implemented completely then malpractices, predatory prices policies and deep discounting by e-commerce players will not occur further.

CAIT secretary, Praveen Khandelwal said the brand new rules will put a great embargo on the tactics used by the global players to manage and dominate retail control in India through online shopping.

In May, CAIT had elevated objections to Walmart’s sixteen billion dollars acquisition of Flipkart saying the offer would create unfair competition and result in predatory costs.

The new regulations build on existing rules under which international investors can acquire 100 % of e-commerce companies, except for a model based on inventory that they are barred.

Amazon India said it is currently analyzing the new rules, while Flipkart did not immediately respond to the request for any comment.