The Indian government is set to impose a set of restrictions on e-commerce companies which will also prevent them from selling items from firms in which they have an equity interest.
The government’s move has drawn flak from e-commerce giants Amazon and Flipkart. The restrictions will be imposed from February 1.
Even if Amazon and Flipkart are protesting against the government’s decision, the move is being supported by other e-commerce leading companies like Snapdeal and Shop Clues.
Snapdeal, in a letter dated January 25, has told the government that a few e-commerce companies were trying to run a proxy inventory-based model of e-commerce model with the help of ‘glaring loopholes’.
Without taking any names, Snapdeal also stated that the loud protests by some firms were an indication of how effective this regulation will be.
According to industry sources, the government’s decision will force Amazon and Flipkart to rework on their existing business plans and raise their compliance costs.
The Indian government had to take the decision after it received complaints from small traders that online retailers have been misusing their control over inventory from their affiliates which have lead to the creation of an unfair marketplace. As a result, the small traders were bound to sell their products at reduced prices. Under the new policy, such arrangements will be prohibited.
A Reuters report suggests that Snapdeal’s Chief Executive Kunal Bahl had written a letter to the commerce minister stating that the timelines allowed by the government were sufficient for compliance.
Snapdeal has also informed that its technological processes have been updated and it will undergo a smooth transition in February.
However, Amazon and Flipkart have requested the government to extend the deadline and asked them for more time to understand and implement the policy.
A Reuters report also suggests that the Indian government will not agree to their demands as Prime Minister Narendra Modi needs the support of small traders in the upcoming general elections.