In a surprising news, India is planning to ban e-commerce companies such as Amazon and Walmart owned Flipkart from selling products from companies in which they have an equity interest. The Indian government in a statement said that the new rules, which will be applicable from February 1, 2019, will prevent these companies from entering into exclusive agreements with the sellers.
“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.”
According to the New York Times, India has already banned e-commerce sites from selling their products directly. The main issue here is that these e-commerce companies use their power to make bulk purchases of goods and then sell to “selected sellers, such as their affiliates or other companies with which they have agreements.” This particular strategy allows giants of the industry like Amazon to offer products at shockingly low prices which smaller competitors find hard to match most of the times. This move could very well force Amazon to stop competing with small sellers, this new policy is also a big blow to Wallmart, another American giant that recently bought 77% stake in Flipkart for a whopping $16 billion.
According to ‘The Times’ this new decision by the Indian government could be motivated by the current Prime Minister of India, “right-wing populist Narendra Modi” in a bid to restore the votes for the upcoming elections. For now, it seems that the Indian government is cracking down on foreign companies in a bid to avoid a monopoly-like situation where giants like Amazon and Walmart could very much battle every local company out of the competition.
