Flipkart, Amazon can't sell products of companies they have stake in: Govt

In a blow to e-commerce marketplaces such as Flipkart and Amazon, the government has barred them from selling products of the firms in which they own stake.

An entity having equity participation by e-commerce marketplace entity or its 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, said the commerce and industry ministry.

It disallowed e-comm firms from entering into an agreement for an exclusive sale of products.

Services should be provided by e-commerce marketplace entity or other firms in which e-retail company 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, added revised policy on foreign direct investment (FDI) in e-retail firms.

Currently, 100 per cent FDI is permitted in marketplace e-commerce activities, not in inventory-based activities.

The ministry further said that the group companies of the marketplace entity should have fair and non-discriminatory cash back policy.

Every year in the month of September, these firms have to file a certificate along with a report of a statutory auditor to the RBI to confirm they are complying with the guidelines.

The norms will be in effect from February 1 next year.

The move comes after several small retailers complained about predatory pricing and deep discounting exercised by e-commerce marketplaces. This month in a letter to PMO, AIOVA had complained that the e-commerce majors like Amazon and Walmart are exploiting small sellers, they are controlling India’s retail market.

They further demanded to fine-tune retail trade in the country as marketplaces are practicing unregulated and anti-competitive business model.