India Tells eCommerce Firms To Comply With New Foreign Investment Rules

To discourage eCommerce firms from offering hefty discounts, India has told the companies that they have to make sure they are complying with new rules for foreign investment. Commerce Minister Piyush Goyal has said the government is ready to listen to concerns, but is committed to shielding small merchants from predatory behavior on the part of firms that are foreign-funded, Reuters reported, citing unnamed sources.

Goyal reportedly made the comments in a closed-door meeting with multiple online retail firms. The discussion comes during a week when U.S. Secretary of State Mike Pompeo is set to travel to New Delhi and trade tensions have risen between the two nations. And, while the country imposed new foreign direct investment (FDI) rules to aid small merchants numbering in the hundreds of thousands, a right-wing group along with small businesses believe that issues remain.

They claim eCommerce retailers tap into business structures that are complex to skirt federal rules while still using billions of dollars for discounts. The government is said to have put the new policy into place following complaints by small traders that claim that large eCommerce companies used their inventory control from affiliated vendors to make an unfair marketplace that had major discounts.

The report comes after news surfaced in January that new restrictions in India were poised to have an impact on Flipkart as well as Amazon and impact how each can do business on their online marketplaces. The firms had until Feb. 1 to comply with the new restrictions, which were announced in December.

U.S.-India Strategic Partnership Forum (USISPF) President Mukesh Aghi said, according to reports in January, “A sudden change in rules is not helpful.” Aghi continued, “It sends a message to groups that the environment is not transparent.” As previously reported, India made sure to protect small merchants when it opened the country to foreign capital in the 1990s, but it wasn’t as clear with its rules when online shopping came into play.