Changes in foreign investment rules for e-comm on the anvil

New Delhi, January 19

The government is considering revising its foreign investment rules for e-commerce, three sources and a government spokesman said, a move that could compel players, including Amazon.com Inc, to restructure their ties with some major sellers.

The government discussions coincide with a growing number of complaints from India’s bricks-and-mortar retailers, which have for years accused Amazon and Walmart Inc-controlled Flipkart of creating complex structures to bypass federal rules, allegations the US companies deny.

India only allows foreign e-commerce players to operate as a marketplace to connect buyers and sellers. It prohibits them from holding inventories of goods and directly selling them on their platforms.

Tweaking clause on equity

• Foreign e-commerce players are allowed to operate as a marketplace to connect buyers and sellers. It prohibits them from holding inventories of goods and directly selling them on their platforms
• Amazon and Flipkart were last hit in December 2018 by investment rule changes that barred foreign e-commerce players from offering products from sellers in which they have an equity stake
• Now, the government is considering adjusting some provisions to prevent those arrangements, even if the e-commerce firm holds an indirect stake in a seller through its parent

Amazon and Walmart’s Flipkart were last hit in December 2018 by investment rule changes that barred foreign e-commerce players from offering products from sellers in which they have an equity stake.

Now, the government is considering adjusting some provisions to prevent those arrangements, even if the e-commerce firm holds an indirect stake in a seller through its parent, three sources said. The sources asked not to be named because the discussions are private.

The changes could hurt Amazon as it holds indirect equity stakes in two of its biggest online sellers in India.

Amazon said e-commerce created “huge job opportunities” and is a significant contributor to economic growth. “Any major alterations” to the policy will adversely impact small and medium-sized busineses, it said in an emailed statement. Walmart and Flipkart did not immediately respond to a request for comment. — Reuters