According to Reuters, American e-commerce behemoth Amazon Inc., and India’s Tata Group have informed the Centre that stricter restrictions for online merchants will significantly impact their business models. The warning came after representatives from the firms met with government officials on Saturday.
The consumer affairs ministry and Invest India, the government’s investment promotion arm, organised the conference. As per Reuters, many CEOs voiced worries and uncertainty about the new guidelines and urged that the July 6 deadline for providing comments be extended.
The Consumer Protection (e-commerce) Rules, 2020, published on June 21, will go into effect after considering industry feedback. The guidelines are anticipated to tighten controls on e-commerce businesses by prohibiting related organisations from selling on the platforms and limiting flash sales.
The e-commerce giants are already prohibited from owning companies that sell on their platform, engaging in exclusive agreements with companies for online sales of products like cellphones, and discounting goods.
According to the new draft, the regulations will apply to all e-commerce firms that are not based in India. The new laws, according to the government, are intended to improve consumer protection.
However, these new restrictions may not only compel global players such as Amazon and Walmart-owned Flipkart to reconsider their business models, but they may also raise prices for domestic competitors such as Reliance Industries’ JioMart, BigBasket, and Snapdeal.
According to Reuters, who cited sources familiar with the events at Saturday’s meeting, Amazon claimed that COVID-19 had already impacted small companies. It said that the proposed rules will significantly impact its sellers, and that several terms were already covered by current legislation.
According to the proposed guidelines, e-commerce companies must guarantee that none of their affiliated businesses are displayed as vendors on their platforms. This might have ramifications for Amazon, which has an indirect ownership in at least two of its sellers’ companies, Cloudtail and Appario.
Meanwhile, Tata contended that the regulations would prevent Starbucks, which has a joint venture with Tata in India, from selling its items on Tata’s marketplace website.
According to two sources, the Tata executives stated that the restrictions will have far-reaching consequences for the company and may limit sales of its own brands.
A consumer ministry official has claimed that the regulations were designed to safeguard consumers and were not as stringent as those in other nations. A request for comment was not returned by the ministry.
A Reliance official agreed that the proposed guidelines would increase customer trust, although he noted that several provisions needed to be clarified.
The regulations were issued in response to rising concerns of India’s brick-and-mortar shops that Amazon and Flipkart use complicated corporate structures to circumvent foreign investment law. The businesses have denied any wrongdoing.
According to documents obtained by Reuters in February, Amazon provided special treatment to a tiny number of its vendors and circumvented foreign investment restrictions. However, Amazon has said that no vendor receives preferential treatment.
According to the commerce minister Piyush Goyal, the government will shortly offer clarifications on foreign investment regulations.