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India to impose new regulations on e-commerce companies

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India to impose new regulations on e-commerce companies

India is set to impose new operational restrictions on e-commerce companies including Amazon.com Inc. and Walmart Inc.-owned Flipkart India Pvt. Ltd., according to a Dec. 26 release by the country's Ministry of Commerce and Industry.

Under the regulations taking effect Feb. 1, 2019, online retailers will not be allowed to sell merchandise from companies in which they hold a stake, and will also be prohibited from making exclusive deals with select sellers. In addition, the e-commerce operators will be required to act in a fair and nondiscriminatory manner when providing vendors with services such as logistics, marketing and payments.

However, e-commerce operators will be able to make bulk purchases through wholesale-focused or other subsidiaries. Those products can then be purchased by affiliates or other sellers under agreements, for resale to other companies or consumers.

The new rules, which expand on foreign direct investment guidelines for the e-commerce sector, were developed following complaints by Indian retailers and traders. Trade groups such as the Confederation of All India Traders have accused e-commerce majors such as Flipkart and Amazon of creating an unfair marketplace through predatory pricing along with tactics to control and dominate the retail trade.

India's three leading online shopping platforms — Flipkart, Amazon and Snapdeal — have been using deep discounts as a tactic to grab customers in the country's rapidly expanding e-commerce market.

Snapdeal CEO Kunal Bahl said in a Dec. 26 Twitter post that his company, which follows a digital marketplace-only model, welcomed the updated regulations. "Marketplaces are meant for genuine, independent sellers. ... These changes will enable a level playing field for all sellers, helping them leverage the reach of e-commerce," he wrote.

Amazon India and Flipkart, which has been majority owned by Walmart since August, did not release any responses regarding the regulatory changes.