Amazon says altering India’s e-commerce investment rules could erode investor confidence, hurt small businesses

INDIA –  E-commerce retail giant Amazon has called on the Indian government not to alter e-commerce investment rules as such a move could dent investor confidence in the sector and potentially have devastating consequences on suppliers and small businesses.

Amazon calls come against a backdrop of disquiet among Indian retailers that foreign e-commerce giants like Amazon and Walmart backed flipkart were creating complex structures to bypass federal foreign investment rules and damage small traders.

Both Flipkart and Amazon have denied any wrongdoing and say they are helping small businesses in India.

Growing complaint from small scale retailers- who form a major cluster of PM Narendra Modi’s support base- has however forced the government to consider revising e-commerce foreign investment rules for weeks.

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The last time these rules were changed was in 2018 and this forced Amazon and Flipkart to rework their business structures and soured trade relations between India and the United States.

It seems small scale retailers are yet to be satisfied by what the government is doing and they have been pushing to have the powers of these retail behemoths clipped.

There have also been allegations that Amazon has been giving preferential treatment to some sellers on its marketplace to the disadvantage of others.

Last month a Reuters report, based on internal Amazon documents, revealed that the U.S. firm had for years given preferential treatment to a small group of sellers on its platform, giving them discounted fees and helping one cut special deals with big tech manufacturers.

In its defence, Amazon has denied any wrong doing and said that the Competition Commission of India (CCI) and the Enforcement Directorate were probing the allegations.

It further said that “it would be premature to make any policy change” until those proceedings have concluded, two sources with direct knowledge of the discussions said.

The antitrust watchdog has said the Reuters story corroborated evidence it had against Amazon, while the federal financial crime-fighting agency has sought information and documents from Amazon.

Walmart-backed Flipkart on the other hand said it welcomed the government consultation process and stressed that India’s the foreign investment policy “needs to be stable and predictable for investor confidence”.

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Reliance backs creation of new e-commerce laws

Meanwhile, the retail arm of Reliance Industries, led by India’s richest man Mukesh Ambani, urged the government to clarify the policy, saying complex legal structures had been used by some firms to bypass rules.

In its submission, Reliance said that such legal creativity includes creating a multi-level company structure to hide the real relationship between the marketplace entity and the sellers.

Reliance further alleged that these marketplace entities are engaged in the control of inventory and are their largest sellers.

As a domestic player, Reliance is not constrained by rules that prohibit companies like Amazon and Flipkart from owning inventory sold via their local websites.

The rules also place other restrictions on the foreign players, which are locked in a battle with Reliance as it expands its e-commerce operations.

Amazon officials, in their submissions, said any clarification in the FDI policy will entail unemployment, ridicule India’s foreign investment policy, and impact consumers.

They said any claims or complaints of violation can be investigated by the relevant agencies and so no clarification is merited as of now.

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