Dealing a bloody blow to e-commerce giants Amazon and Flipkart, the Indian government has banned them from offering deep discounts, cashback schemes and more. This move comes after complaints from local traders that these policies of Amazon and Flipkart are putting them out of business.
Local traders have been complaining about e-commerce websites like Amazon and Flipkart hurting their business for a few years now. A while ago, the government had banned both these retail players from selling products directly. This ban, however, was easily circumvented by buying stakes in affiliate companies and continuing the sell products via those companies.
That said, this time the ban on various discounting and cashback policies of Amazon and Flipkart could have a more decisive impact. In addition to banning these policies, the government has also banned them from tying up with brands to sell their products exclusively. As such, companies like Xiaomi, OnePlus, Huawei/Honor among others will not be able to sell their devices exclusively on any one portal.
Tightening the noose further, the government also requires Amazon and Flipkart to furnish a certificate along with a report of their statutory auditor to the Reserve Bank of India. This certificate shall be filed by September 30 every year and shall confirm the compliance of these norms, and violations therein.
This ban will come in effect from February 1, 2019, according to a statement by the Department of Industrial Policy and Promotion. Further elaborating on these rules, the DIPP said,
“Inventory of a vendor will be deemed to be controlled by e-commerce marketplace entity if more than 25 percent of purchases of such vendor are from the marketplace entity or its group companies’. 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.”