Under the new rules, which go into effect on Feb. 1, India will not allow eCommerce companies to sell products from businesses that they have an equity interest in.
Also, the companies can’t have exclusive agreements with sellers. For example, Xiaomi can no longer sell Mi phones only on Flipkart, which is a common practice in the country during a new phone launch.
“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,” the commerce ministry said.
The regulations are a response to complaints from traders and retailers who say eCommerce companies have an unfair advantage, and are using their inventories to sell products at extremely low prices.
This practice happens because eCommerce companies can make huge purchases in bulk and then sell merchandise through exclusive agreements or arrangements.
In October, the All India Online Vendors Association (AIOVA) filed a petition with an anti-trust organization, the Competition Commission of India, saying that Amazon gives preference to sellers it has ownership in, like Cloudtail or Appario. A petition was also filed against Flipkart.
The new rules say services given to vendors should be done in a fair and non-discriminatory way. The rules are meant to aid and appease India’s small traders and farmers.
In a statement, according to Reuters, the Confederation of All India Traders said that when the law goes into effect the policies of deep discounting and what it called “predatory” pricing won’t happen anymore.
Amazon India said it’s evaluating the new policies.