Published: Sun, February 03, 2019
Business | By Eloise Houston

Government To Not Extend February 1 Deadline For E-Commerce Norms

Government To Not Extend February 1 Deadline For E-Commerce Norms

While the government has clarified that there's no "restriction on the nature of products (private labels) sold on the marketplace", but the first two guidelines taken in conjunction imply that Amazon or Flipkart can not sell its own products and private labels. New government-issued norms, which kicked in just today, prevent foreign firms from selling their products directly to consumers.

The biggest casualty, sources said, would be e-commerce platforms, including Cloudtail, a JV between Amazon.com and Narayan Murthy's family office Catamaran Ventures, and Appario Retail, a wholly-owned subsidiary of the JV between Amazon India and Ashok Patni.

Major stakeholders led by Walmart and Amazon had sought a six-month extension even though other players like Snapdeal and offline traders led by the Confederation of All India Traders supported the government's move. Amazon's range of Echo smart speakers, meanwhile, are only available through third-party sellers on the site, and majority are scheduled to ship weeks from now.

The government also prohibited e-commerce companies from entering into an agreement for exclusive sale of products. And they may have to develop India-specific private labels, which the government allows.

"All Amazon devices are now available on Amazon.in", the company said in a statement. For its part, Amazon India said in a statement that it needed more time to understand how to navigate the new policies, and to address the concerns of more than 400,000 sellers on its platform. "It's likely to disrupt availability for customers", he said.

This means that Amazon can no longer sell on Amazon.in through Cloudtail India, which is/was one of the largest sellers on the platform.

Announced in December 2018 under Press Note 2, the new regulations will bar online marketplaces, that are backed by foreign investments, from selling products of the companies where they hold stakes in, as well as ban exclusive marketing arrangements. Last summer the government approved an Amazon proposal to invest $500m to retail food products. Apparently, BPL has slammed the new regulations and added that the company will continue to sell products on Amazon since it's their choice and decision as to where to sell the products.

Walmart's and Amazon's tactics have been controversial in a country where organised retail accounts for only about 10 percent, and the market is dominated by small sellers and mom-and-pop stores. The company's main goal was to minimise the impact of the new rules on customers and sellers, he added.

But industry watchers believe that it is an act by the ruling regime to appease millions of small traders that form a considerable vote bank.

"By the letter of the regulation it will not be considered to be an entity in which Amazon has an equity stake, but if the government is wanting to implement the spirit of this rule they might say this doesn't cut it", one of the sources said.

A senior executive, who did not wish to be identified, said these companies remain hopeful and are still reaching out to officials to explain the overhaul required in business models to ensure compliance with the new rules.

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