As an immediate fallout of the new ecommerce policy guidelines issued by the Indian government, Amazon is taking a serious look at the legality of the food retail entity it has created, Amazon Retail India Pvt. Ltd (ARIPL) continuing to sell on its Amazon platform. It is reported that the company is obtaining a legal opinion on this before taking the next step.
Amazon had invested $500 million in this project and set up a separate facility in Pune. ARIPL has already started selling on Amazon as well, but the new guidelines don’t permit such entities.
“An entity having equity participation by ecommerce marketplace entity or its group companies, or having control on its inventory by ecommerce marketplace entity or its group companies, will not be permitted to sell its products on the platform run by such marketplace entity”.
This is how the guideline reads. Now a cursory glance at the wording of this makes it clear that ARIPL cannot sell on Amazon beyond January 31, the date the current dispensations will end, since from February 1, the new guidelines take effect.
Amazon Retail India Pvt. Ltd is a 100% owned subsidiary of Amazon and there is no way it can escape the rule. Even otherwise, the new guidelines have created a lot of confusion and the trade is still to come to terms with the guidelines to be enforced from February 1.
At the centre of this debate is the policy that governs the foreign direct investment or FDI norms. Many of these regulations apply to the traditional brick and mortar companies that are setup with the FDI permissions, and these guidelines have been issued as there was a grey area as far as the ecommerce space was concerned.
Amazon claims it does not believe in violating the laws of the countries it operates in and once it is armed with the exact legal status, it may proceed with the next step. The company says there are 400,000 small and medium sized sellers on its platform.
Another major seller Cloudtail on Amazon will also become ineligible to continue selling on the platform as per the new guidelines.