Traditional traders and local players on Thursday rejoiced over new e-commerce rules introduced by the Indian government for global giants like Amazon and Walmart, which analysts said could force them to reconsider their Indian activities.
Under the surprising restrictions, e-commerce companies are prohibited from selling products of companies in which they are involved. They are also prohibited from concluding exclusive deals with sellers.
The rules, which come into effect on February 1, will mainly affect Amazon, which has invested billions of dollars in its India operation, and Flipkart, which was acquired this year by another US giant, Walmart.
The government responded to complaints from brick and mortar retailers that e-commerce giants were unfairly selling products at special prices.
Indian law is already preventing foreign companies from selling directly on their websites.
For example, e-commerce companies bought in large quantities and then sold the products to preferred providers. These then continue to sell the products at a discount to the e-commerce sites that legally remain intermediaries.
Amazon and Walmart, which bought a 77 percent stake in the Indian company Flipkart for $ 16 billion in May, will be hit hardest by the new rules. Both have not made a public reaction.
Snapdeal, one of India’s largest internet shopping sites, said the changes would create a level playing field for all sellers.
“Marketplaces are for real, independent sellers, many of whom are KKMUs (Micro, Small and Medium Enterprises),” said Snapdeal founder Kunal Bahl on Twitter.
The Confederation of All India Traders (CAIT) said the new directive would end the discounting of wars between e-merchants.
It would also prevent large companies from taking advantage of “the policy of exclusivity, cutthroat prices and deep discounts,” CAEP secretary Praveen Khandelwal told AFP.
The new rules begin on February 1, when Prime Minister Narendra Modi’s nationalist government announces its interim budget before a parliamentary election in May.
Analysts said the rule would have a major impact on the business models built by US giants over the past five years as they move into the growing Indian market.
“Amazon, Walmart and others with their investments in India need to rethink their business strategies,” said Satish Meena of Forrester Research to AFP.
“Consumers will be facing the major victims and prices will rise as available options fall.”
Over the past two years, the Indian government has been trying to strengthen domestic companies against foreign competition.
It has told credit card companies like Visa, American Express and Mastercard that all Indian information needs to be stored on computers in India.
The government has also proposed restrictions on what Internet giants can do with personal information.
It has recently been suggested that the WhatsApp messaging application breaks its brand encryption, which guarantees private communication between users. The Facebook company has resisted the calls violently.