Amazon, Flipkart, get a blow as Government Looks to Online Exclusives, and Few other Restrictions
The government is striking to end the online exclusives. Both the companies will not be able to sell the products of the company where they have stake and thus both the companies will be highly impacted.
The Indian government is set again to revolution, as they will ban the much awaited and loved e-commerce companies like Amazon.com and Walmart-owned Flipkart Group from selling products from the companies where they have equity interest. The companies will also be restricted to enter exclusive agreements with the sellers and the rules will be in practice from the 1st of February.
The e-commerce companies can make bulk purchases and then sell the product to select sellers like their affiliates or companies with which they have agreement. The sellers in turn can sell the products to companies or direct consumers at low prices.
This was to support the Indian retailers and traders who complaint that these giant e-commerce companies have control over inventory from their affiliates because of the exclusive sale agreement and this leads to unfair marketplace and lets them sell the product at very low prices.
The All India Online Vendors Association (AIOVA) in October had filed a petition with anti trust body Competition Commission of India (CCI) stating that these e-commerce companies favors the merchants with whom it has stake interest like Cloudtaril and Appario. Both the companies were accused of the same.
The rules set boundaries on the service provided by the vendors should be done in a fair manner and also cash back incentive while online shopping should not be on the fact that product was purchased from affiliate company or not.
The new rules are in the favor of small traders and farmers who feared the entry of big American companies and dominating the Indian retailing.
The companies have faced set back and are yet to comment on the new laws.