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Would you like Indian style Amazon regulation?

By Sasha Fedorenko February 25, 2019 - 4:54 pm

India new online marketplaces regulation aims to support its growing ecommerce industry and restricts the way online marketplace such as Amazon operate in the country. India’s Amazon Regulation restricts Amazon from selling their own brands on their marketplace.

The new online marketplaces regulation published in Draft National Ecommerce Policy yesterday focuses on data localisation, improving privacy safeguarding and tackling counterfeit products. This would help India give a boost to computing and create more local jobs.

Foreign companies would have three years to comply with the new policy, which could possibly add more costs to their operations. Businesses are invited to send their comments to goonjan.kumar@gov.in by 9th of March 2019.

A partner of a law firm in India said that the new regulations appear to cap the ability of foreign businesses to trade successfully in the country.

In other countries, the focus is on transparency and playability, which itself can put some restrictions on foreign players. But, here it looks like their focus is to destroy the ability of large entities to operate and that will apply to foreign as well as large domestic players.”
– Rahul Matthan, partner, Trilegal

The new policy comes two months after India proposed a new regulation to govern foreign direct investment in ecommerce. The regulation prohibits merchants from selling more than 25% of products via any single online marketplace. It also bans exclusive sales, retailers from selling items in which they’re also investors. This month saw Amazon removing items on their Indian site as they began to comply with the new policy. Amazon’s own brand products such as the Echo, Presto-branded home cleaning goods and batteries were nowhere to be found on their Amazon India platform.

How India’s rules impact Amazon Regulation

The new policy puts a question mark on whether the trading restrictions would influence Amazon’s operations in the country. As a new entrant, Amazon would need to launch a large volume of their own products to attract customers. However, the new policy makes the launch impossible as Amazon can only trade as a marketplace in India. The spotlight also falls on the limitation of Amazon’s ‘dual role’  as a retailer and marketplace. This means, that on-demand products such as Amazon Echo and Fire TV Stick won’t be available on Amazon India unless the marketplace will find another way to offer them to Indian customers.

Amazon have been considered of abusing their dominant position, which prompted the Austrian Federal Competition Authority (BWB) to launch an antitrust probe over alleged discrimination of sellers on their marketplace. The BWB said they had received complaints from a high double-digit number of stores via Austrian trade association of retailers, in December. Complaints say that Amazon discriminates against other merchants in an attempt to boost their own products on the marketplace. Last November saw German antitrust authority opening a similar investigation.

Would you like stronger Amazon Regulation in the UK and EU?

Amazon are able to launch in new countries such as Australia due to their retail operations. Then sellers can piggyback onto the marketplace in territories where Amazon would perhaps not launch if they couldn’t also sell as a retailer. The question is are Amazon so dominant that they should be banned from selling their own products or should there be partial restrictions in the UK and EU around how their promote their own products compared to products from their third party merchants?

  • James
    7 months ago

    This is a fantastic idea by the Indian government. The reasons unfortunately are probably less to do with encouraging competition and more to do with local politics

    i) Indian elections are coming up soon and the government is aiming to satisfy the SME’s who have lobbied against the big marketplaces

    ii) Potential discrimination in favour of domestic entrants such as Reliance who are likely to enter the space

    However and in any case this is great news for Indian SME’s. It is important in a new marketplace that healthy competition is promoted amongst companies to foster a better environment that will ultimately benefit the consumer. Here in the UK and most of the west we have a system where Amazon abuses its position to copy it’s merchants, promote it’s own goods above others and this will ultimately harm consumers more in the long run. It is great to see the EU is looking into this, however with any government organisation the process will be long, convoluted and will allow Amazon to abuse the system for many years until, slow moving, bureaucratic and lazy public organisations can formulate a set of rules to prevent Amazon and others from this sort of behaviour.

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