NEW DELHI, July 3 (Reuters) – Amazon.com Inc (AMZN.O) and Indian group Tata on Saturday warned government officials that draft stricter rules for online retailers would have a major impact on their business models, according to four sources familiar with the discussions told Reuters.
At a meeting hosted by the Ministry of Consumer Affairs and government investment promotion arm, Invest India, many executives expressed concern and confusion over the proposed rules and called for the July 6 deadline to submit comments be extended, the sources said.
Strict new government e-commerce rules announced on June 21 aimed at strengthening consumer protection have raised concerns among online retailers nationwide, including market leaders Amazon and Walmart Inc (WMT.N) Flipkart.
New rules limiting flash sales, banning deceptive ads, and imposing a complaints system, among other proposals, could force Amazon and Flipkart to overhaul their business structures and could increase costs for domestic competitors, including Reliance Industries’ JioMart (RELI .NS), BigBasket and Snapdeal. Read more
Amazon has argued that COVID-19 has already hit small businesses and the proposed rules will have a huge impact on its sellers, arguing that some clauses were already covered by current law, two of the sources said.
The sources asked not to be named because the discussions were private.
The proposed policy states that e-commerce businesses should ensure that none of their related businesses are listed as a seller on their websites. This could have a particular impact on Amazon as it has an indirect stake in at least two of its sellers, Cloudtail and Appario.
On this proposed clause, a representative from Tata Sons, the holding company of India’s $ 100 billion Tata group, argued that it was problematic, citing an example to say it would shut down Starbucks (SBUX.O) – which has a joint venture with Tata in India – to offer its products on the Tata Marketplace website.
Tata’s executive said the rules will have wide ramifications for the conglomerate and could restrict sales of its private labels, according to two of the sources.
Tata declined to comment.
The sources said an official from the Consumer Affairs Ministry argued that the rules were aimed at protecting consumers and were not as strict as those in other countries. The ministry did not respond to a request for comment.
A Reliance executive agreed the proposed rules would boost consumer confidence, but added that some clauses needed clarification.
Reliance did not respond to the request for comment.
The rules were announced last month amid growing complaints from traditional Indian retailers that Amazon and Flipkart are circumventing foreign investment law by using complex business structures. The companies deny any wrongdoing.
A Reuters investigation in February cited documents from Amazon that showed it was giving preferential treatment to a small number of its sellers and circumventing foreign investment rules. Amazon said it does not accord favorable treatment to any seller.
The government will soon release some clarifications on foreign investment rules, India’s Commerce Minister Piyush Goyal said on Friday.
Reporting by Aditya Kalra in New Delhi; Editing by Euan Rocha and Louise Heavens
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