Govt to end price war, will disallow Cloudtail and WS Retail from Amazon, Flipkart

After a series of discussions with industry stakeholders, the government recently came out with a draft of the national e-commerce policy. However, the e-commerce draft met with strong criticism from online companies. The government later agreed to further consider on it.

Of the many recommendations, the key point was barring group companies of e-commerce players from directly or indirectly influencing sale prices, which the government still considers a major issue in the e-commerce segment.

To level the playing field in e-commerce, the government is considering disallowing anchor sellers controlled by the platforms to conduct business on them.

The move will affect the business of Amazon India and Flipkart, which give deep discounts on products sold via their own controlled entities.

Amazon has two joint venture sellers in India, Cloudtail India Private Ltd and Appario Retail Private Ltd. In Cloudtail, 49 per cent share is owned by Amazon Asia and the other 51 per cent share is owned N R Narayana Murthy’s venture capital company, Catamaran Ventures. Similarly, Appario is a joint venture between Amazon and Frontizo Business Services, owned by Ashok Patni of software services company Patni Computers.

Flipkart also has WS Retail. Once the e-commerce-owned seller contributed close to three-fourths of Flipkart’s sales. Now, even after the government’s cap of 25 per cent sale, it is still the biggest seller on the platform.

The move might be upsetting for e-commerce giants, but brings a sigh of relief for smaller sellers on the platforms. The sellers have been demanding to end the price-war played by Amazon and Flipkart via their own-controlled sellers.

Importantly, the e-commerce draft is heavily in favour of Indian businesses or small sellers which suggested Indian-owned and Indian-controlled online marketplaces be allowed to hold inventory as long as products are 100 per cent domestically produced.

The development was first reported by Factordaily.