Flipkart and Amazon logos
Flipkart and Amazon logos

India considering changes to FDI policy that could hurt Amazon, Flipkart: Report

With India considering revising the rules, these e-commerce players will be forced to restructure how they work with sellers in the country.

E-commerce players such as Flipkart and Amazon could potentially be impacted by the proposed revision of foreign investment rules in e-commerce, Reuters reported on Tuesday. As per the report, with India considering revising the rules, players will be forced to restructure how they work with sellers in the country.

India’s e-commerce rules allow players such as Amazon and Flipkart to only operate as a marketplace. They are not allowed to hold inventory or offer products from sellers where they have a stake.

The report states that now the government is considering tweaking this provision where the companies will not be allowed to sell even if they hold an indirect stake in a seller through its parent company.

Amazon had earlier rejigged its equity holdings in Cloudtail India and Appario Retail in order to be able to sell in the country after the earlier changes.

The Reuters report states that among the changes the government is considering, another is that a seller will not be able to purchase goods from the e-commerce entity or its parent company and sell it on the same platform. As things currently stands, a seller can purchase upto 25% of the e-commerce entity's inventory wholesale and then sell it on the platform.

This comes at a time when these e-commerce platforms have been accused of anti-trust practices in the country. The Karnataka High Court is currently hearing challenges to the petition filed by the Competition Commission of India seeking to remove a stay by court on a probe the regulator had ordered into Flipkart and Amazon’s alleged anti-competitive practices.

The Ministry of Commerce and Industry’s spokesperson Yogesh Baweja told Reuters that the government is working on the issue, and any changes will be announced by a Press Note. The last such press note was in 2018, after which Flipkart and Amazon had to restructure their businesses in the country. “Of course, Amazon’s a big player so whatever advice, whatever suggestions, whatever recommendations they make, they are also given due consideration,” he told Reuters. 

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