India tightens e-commerce rules, likely to hit Amazon, Flipkart

Workers prepare customer orders for dispatch as they work around goods stored inside an Amazon.co.uk fulfillment centre in Peterborough, central England, on November 15, 2017. (AFP)
Updated 27 December 2018

India tightens e-commerce rules, likely to hit Amazon, Flipkart

  • The new rules said that services provided to vendors on an e-commerce platform and by that entity’s affiliates should be done so at arm’s length and in a fair and non-discriminatory manner

NEW DELHI/MUMBAI: India will ban e-commerce companies such as Amazon.com and Walmart -owned Flipkart Group from selling products from companies in which they have an equity interest.
In a statement, the government also said that the companies will be prevented from entering into exclusive agreements with sellers. The new rules will be applicable from February 1.
“An entity having equity participation by e-commerce marketplace entity or its group companies, or having control on its inventory by e-commerce marketplace entity or its group companies, will not be permitted to sell its products on the platform run by such marketplace entity,” the commerce ministry said in a statement.
E-commerce companies can make bulk purchases through their wholesale units or other group companies that in turn sell the products to select sellers, such as their affiliates or other companies with which they have agreements.
Those sellers can then sell the products to other companies or direct to consumers, often at attractively low prices.
The new regulations follow complaints from Indian retailers and traders, who say the giant e-commerce companies are using their control over inventory from their affiliates, and through exclusive sales agreements, to create an unfair marketplace that allows them to sell some products at very low prices.
The All India Online Vendors Association (AIOVA) in October filed a petition with the anti-trust body Competition Commission of India (CCI) alleging that Amazon favors merchants that it partly owns, such as Cloudtail and Appario. The lobby group filed a similar petition against Flipkart in May, alleging violation of competition rules through preferential treatment for select sellers.
Wednesday’s notification also said that the cash back that customers get as an incentive while online shopping should not be based on whether the product was purchased from an affiliate of the platform or not.
The new rules said that services provided to vendors on an e-commerce platform and by that entity’s affiliates should be done so at arm’s length and in a fair and non-discriminatory manner.
New rules will appease small traders and farmers who fear that US companies are making a back door entry into India’s retail market and could squeeze out small corner shops that dominate Indian retailing.
The Confederation of All India Traders in a statement said that if the order is implemented in full then malpractices, predatory pricing policies and deep discounting by e-commerce players will no longer occur.
CAIT secretary general Praveen Khandelwal said the new rules will put an embargo on the tactics adopted by the global players to control and dominate retail trade in India through e-commerce.
In May, CAIT had raised objections to Walmart’s $16 billion acquisition of Flipkart saying the deal would create unfair competition and result in predatory pricing.
The new regulations build on existing rules under which foreign investors can acquire 100 percent of e-commerce companies, with the exception of a model based on inventory from which they are barred.
Amazon India said it is currently evaluating the new rules, while Flipkart did not immediately respond to a request for comment.


US trade offensive takes out WTO as global arbiter

Updated 10 December 2019

US trade offensive takes out WTO as global arbiter

  • Two years after starting to block appointments, the US will finally paralyze the WTO’s Appellate Body
  • Two of three members of Appellate Body exit and leave it unable to issue rulings

BRUSSELS: US disruption of the global economic order reaches a major milestone on Tuesday as the World Trade Organization (WTO) loses its ability to intervene in trade wars, threatening the future of the Geneva-based body.
Two years after starting to block appointments, the United States will finally paralyze the WTO’s Appellate Body, which acts as the supreme court for international trade, as two of three members exit and leave it unable to issue rulings.
Major trade disputes, including the US conflict with China and metal tariffs imposed by US President Donald Trump, will not be resolved by the global trade arbiter.
Stephen Vaughn, who served as general counsel to the US Trade Representative during Trump’s first two years, said many disputes would be settled in future by negotiations.
Critics say this means a return to a post-war period of inconsistent settlements, problems the WTO’s creation in 1995 was designed to fix.
The EU ambassador to the WTO told counterparts in Geneva on Monday the Appellate Body’s paralysis risked creating a system of economic relations based on power rather than rules.
The crippling of dispute settlement comes as the WTO also struggles in its other major role of opening markets.
The WTO club of 164 has not produced any international accord since abandoning “Doha Round” negotiations in 2015.
Trade-restrictive measures among the G20 group of largest economies are at historic highs, compounded by Trump’s “America First” agenda and the trade war with China.
Phil Hogan, the European Union’s new trade commissioner, said on Friday the WTO was no longer fit for purpose and in dire need of reforms going beyond just fixing the appeals mechanism.
For developed countries, in particular, the WTO’s rules must change to take account of state-controlled enterprises.
In 2017, Japan brought together the United States and the European Union in a joint bid to set new global rules on state subsidies and forced technology transfers.
The US is also pushing to limit the ability of WTO members to grant themselves developing status, which for example gives them longer to implement WTO agreements.
Such “developing countries” include Singapore and Israel, but China is the clear focus.
US Commerce Secretary Wilbur Ross told Reuters last week the United States wanted to end concessions given to then struggling economies that were no longer appropriate.
“We’ve been spoiling countries for a very, very long time, so naturally they’re pushing back as we try to change things,” he said.
The trouble with WTO reform is that changes require consensus to pass. That includes Chinese backing.
Beijing has published its own reform proposals with a string of grievances against US actions. Reform should resolve crucial issues threatening the WTO’s existence, while preserving the interests of developing countries.
Many observers believe the WTO faces a pivotal moment in mid-2020 when its trade ministers gather in a drive to push through a multinational deal — on cutting fishing subsidies.
“It’s not the WTO that will save the fish. It’s the fish that are going to save the WTO,” said one ambassador.