India is taking into consideration a revision of its rules for foreign direct investment in eCommerce. Thus, this step is mainly for the prevention of eCommerce from having an indirect stake. Through their parent companies in the seller entities which sell products on their marketplaces.
Three sources and a government spokesman told Reuters that; this move could compel key players including Amazon.com Inc, to restructure their ties with some major sellers.
Who will this decision impact?
The changes in the regulations are most likely to impact Amazon. As it holds an indirect equity stake in two of its biggest online sellers. India also permits foreign companies to make direct investments in marketplace-based eCommerce operations. However, eCommerce companies that possess ownership of their inventory are not permitted to have foreign investments. India’s latest Press Note 2, 2018 attempted to address the reign in of how much marketplaces can further influence the sale of products for their benefit.
What is the root cause of such a decision?
Over years, physical retailers and associations have demanded more control of the government. Moreover, oversight of the operations of eCommerce giants like Amazon and Walmart-owned Flipkart. The two massive eCommerce companies have dealt with accusations of creating structures. To bypass central government regulations around deep discounting and even violating FDI rules.
Another noteworthy instance was the lash out at Amazon and Flipkart by the retailer’s body CAIT; asking that they penalized for violating foreign investment rules. The body claimed both the companies control inventory sold on their respective websites. Flipkart does this via its “affiliate companies” like Omnitech Retail and WS Retail. While Amazon doe this via companies such as Cloudtail and Appario Retail, it has alleged.
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