The government on Wednesday tightened e-commerce norms and barred online retail firms like Amazon and Flipkart from selling products of companies in which they have stakes, Ministry of Commerce and Industry said in a statement.
The online retail firms (e-commerce marketplace entity) are also prohibited from mandating any company to sell its products exclusively on its platform only, as per the revised policy on FDI in e-commerce which comes into effect from February 1, 2019.
"An entity having equity participation by e-commerce marketplace entity or group companies, or having control on its inventory by e-commerce marketplace entity or its group companies, will not be permitted to sell its products on the platform run by such marketplace entity," it said.
The Ministry further said that the online retail firms will not directly or indirectly influence sale price of goods and services and will maintain level playing field.
"Services should be provided by e-commerce marketplace entity or other entities in which e-commerce marketplace entity has direct or indirect equity participation or common control, to vendors on the platform at arm's length and in a fair and non-discriminatory manner," it said.
Such services include fulfilment, logistics, warehousing, advertisement, marketing, payments and financing, among others. Cash-back provided by group companies of marketplace entity to buyers shall be fair and non-discriminatory, it said.
"For the purposes of this clause, provision of services to any vendor on such terms which are not made available to other vendors in similar circumstances will be deemed unfair and discriminatory," the statement said.
Welcoming the move, CAIT Secretary General Praveen Khandelwal said, “In the wake of foul play of global players in adopting all kind of tactics to control and dominate retail trade of India through e-commerce, today’s clarifications of the Govt will prove to be an embargo on such practices. It’s a big achievement after a long struggle. If it is implemented in proper spirit, malpractices and predatory pricing policy and deep discounting of e-commerce players will be a matter of the past.
Khandelwal however noted that formation of a Regulatory Authority for e-commerce is also required to regulate and monitor e-commerce business in India. He said that this policy should be implemented with retrospective effect from April 1, 2018.
Further, the online retailers will have to file a certificate along with a report of statutory auditor to Reserve Bank of India, confirming compliance of guidelines by September 30 of every year for the preceding financial year.
The decision comes against the backdrop of several complaints by traditional retail stores alleging that heavy discounts by online retailers to consumers are hurting their businesses.