Amazon and Tata say the Authorities of India's e-commerce guidelines will hit companies

© Reuters. FILE PHOTO: People walk past an Amazon India hoarding outside a subway station in New Delhi, India on Oct 23, 2019. REUTERS / Anushree Fadnavis / file photo

By Aditya Kalra

NEW DELHI (Reuters) – Inc and India's Tata Group on Saturday warned government officials that plans for stricter rules for online retailers would have a big impact on their business models, four sources familiar with the discussions told Reuters.

At a meeting organized by the Department of Consumers and the government's investment promotion division, Invest India, many executives expressed concerns and confusion about the proposed rules and called for an extension of the July 6 deadline for comments, the sources said.

The government's tough new e-commerce rules announced on June 21 to strengthen consumer protection have caused concern among online retailers in the country, particularly market leaders Amazon (NASDAQ 🙂 and Walmart (NYSE 🙂 Incs Flipkart.

New rules that, among other things, restrict flash sales, prohibit misleading advertising, and mandate a complaint system could force Amazon and Flipkart, among others, to review their business structures and could increase costs for domestic competitors like JioMart, BigBart, and Snapdeal from Reliance Industries.

Amazon 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 are already covered by applicable law, two of the sources said.

The sources asked not to be named as the conversations were private.

The proposed policy is that ecommerce businesses must ensure that none of their affiliates are listed as sellers on their websites. This could particularly affect 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 $ 100 billion holding company of India's Tata Group, argued that it was problematic and cited an example to say they are stopping Starbucks (NASDAQ 🙂 – which is a joint venture with Tata in India – from listing its products on Tata's marketplace website.

The Tata executive said the rules would have far-reaching implications for the conglomerate and could limit sales of its own brands, according to two of the sources.

Tata declined to comment.

The sources said an official from the Department of Consumers argued that the rules were designed to protect consumers and are not as strict as those in other countries. The ministry did not respond to a request for comment.

A Reliance manager agreed that the proposed rules would build 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 mounting complaints from Indian brick and mortar retailers that Amazon and Flipkart are circumventing foreign investment law with complex business structures. The companies deny any wrongdoing.

A Reuters investigation in February cited documents from Amazon showing that a small number of its sellers were given preferential treatment and foreign investment rules were circumvented. Amazon has said it does not give any seller preferential treatment.

The government will shortly make certain clarifications on the rules for foreign investment, Indian Trade Minister Piyush Goyal told reporters on Friday.

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