Economy

Amazon forced to pull products in India as new rules bite

Amazon forced to pull products in India as new rules bite”

"We are committed to doing everything we can to be compliant with the new rules", Flipkart India executive Rajneesh Kumar said in a statement, without explaining how the website was impacted.

Over the last few weeks, both Amazon and Flipkart had been extensively lobbying - directly as well as through associations and trade bodies - with government officials seek an extension in deadline.

These new e-commerce FDI rules prohibit marketplace "owners" from selling products on their own marketplace through vendor entities in which they have an equity interest.

Amazon said: "While we remain committed to complying with all laws and regulations, we will continue to look to engage with the government to seek clarifications that help us decide our future course of action as well as minimise the impact on our customers and sellers".

Cloudtail and Appario, among the top sellers on Amazon India, could also face similar restrictions, because Amazon owns minority stakes in their parent firms.

A shipment moves on a conveyor belt at an Amazon Fulfillment Centre (BLR7) on the outskirts of Bengaluru, India, September 18, 2018. Smaller e-commerce firms like Snapdeal and ShopClues as well as offline retailers have also written to Commerce Ministry, urging the government to not give into pressure from USA companies and authorities.

On Friday, Flipkart said it was disappointed the government had chose to implement the regulations in haste, adding, however, that it would do everything to be compliant.

Many small traders say the e-commerce giants use their buying power and control over inventory from affiliated vendors to create an unfair marketplace where they can offer deep discounts on some products.

This creates a barrier for India's Shopper's Stop to sell on Amazon India, as Amazon's investment arm has a minority stake in the department store chain. Such arrangements will now be barred.

Exclusive deals with sellers will be discontinued, the two sources said.

"The company has no choice as they are fulfilling a compliance requirement, the customers will suffer", said one of the sources.

The policy move has jolted Walmart, which previous year invested $16 billion in Flipkart in its biggest ever deal, and Amazon, which has committed $5.5 billion in India investments.

Industry sources have said the new rules will dent foreign investor sentiment and force the big online retailers to change their business structures, raising compliance costs.

While e-commerce firms such as Amazon and Walmart controlled Flipkart were lobbying to defer the date by at least six months, home-grown players - Snapdeal, ShopClues, and others have been in favour of the government's diktat. The products that were no longer immediately available included its range of Echo speakers, Amazon's Presto-branded home cleaning products and other Amazon Basics products such as chargers and batteries.

According to sources, both Flipkart and Amazon were extremely hopeful that the government will soften its stand but given the magnitude of investments at stake, these companies had already started working on their plan B in case the deadline wasn't extended.

These changes are expected to hit Amazon and Flipkart the hardest.



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