E-commerce marketplace entity "will not mandate" any seller to sell any good "exclusively" on its platform "only", the note fro the Ministry said.
Calling the new provisions a mixed bag of clarifications and additional restrictions for stakeholders, Anil Talreja, partner, Deloitte India, said, "This will certainly push the impacted entities to relook at their business model, shareholding structure and transactions".
The new regulations build on existing rules under which foreign investors can acquire 100 per cent of e-commerce companies, with the exception of a model based on inventory from which they are barred.
Barring e-commerce marketplaces from selling products of firms in which they own stakes could hit Amazon in particular, given that it has several such joint ventures, including Cloudtail and Appario. In other words, the government has not entirely put a stop to e-commerce sites offering cashbacks and discounts, but it has stipulated that it needs to be fair. This will no doubt come as a massive blow for both companies and e-commerce platforms. The government this time seems more clear with rules as there was a need to curb anti-competitive behaviour in the e-commerce industry and create a level playing for all stakeholders. It should neither control the inventory nor influence the price. They could bring in a friendly third-party for the vendor entities and continue to be in business and provide aggressive pricing for the marketplace. As a consumer, you're hardly paying attention to the ownership of the company - if it talks like Amazon, walks like Amazon, then it's probably Amazon.
The above decision will take effect from February 1, 2019.
How can we say while abuse is bad, we will tolerate it so long as such abuse doesn't cross the 25 percent limit?
According to the new rules, "inventory of a vendor will be deemed to be controlled by e-commerce marketplace entity if more than 25 percent of purchases of such vendor are from the marketplace entity or its group companies". This means that a company like OnePlus will not be able to sell its phone exclusively on Amazon's platform.
Already operational brands such as BPL, Blaupunkt TV, Sanyo, Tenor, Thomson, Amazon Basics and Meizu among many operating through Amazon and Flipkart are not averse to tweaking their business models. The ban is only on exclusive sale. This may mean select sellers on Amazon and Flipkart can not individually offer cashbacks.
It further said that these companies will have to file a certificate along with a report of statutory auditor to the RBI, confirming compliance of guidelines by September 30th of every year for the preceding fiscal.
The new norms would also prevent the trend of influencing prices by e-commerce giants and ensure better enforcement of FDI guidelines in e-commerce firms.
The e-commerce reforms comes hot on the heels of better and improved consumer protection ushered in last week through a fresh Consumer Protection Bill 2018 passed by the Lok Sabha that also seeks to discipline online sales.