New e-commerce rules will hurt business: Amazon and Tata to govt
The American e-retailer Amazon and India’s own Tata Group expressed concern over the new e-commerce rules. Both companies said in a meeting with the Consumer Affairs Ministry on Saturday that the changes will adversely impact their business models.
The Consumer affairs ministry along with Invest India, the government’s investment promotion arm organised the meeting. Not only Amazon and Tata opposed the new e-commerce rules but many other executives too expressed their concerns. They asked the government to extend the June 6 deadline for submitting comments.
Amidst numerous complaints by traders and small businesses that Flipkart and Amazon were scorning the laws, the government introduced Consumer Protection (e-commerce) Rules, 2020.
These laws were introduced on June 21. These will apply to all the e-commerce platforms established outside India. According to the government, these will strengthen consumer protection in the country.
What are the new rules?
The new rules ban flash sales, any false advertisements and look to put forward a complaint system to establish accountability. This will require the e-retailing giants to restructure their business models.
Not only that, the new rules can increase the cost of local e-commerce players like Jiomart, Snapdeal and BigBasket.
Already, e-commerce platforms are banned from having stakes in the firms that sell on their platform. Also, they are prohibited from entering into exclusive agreements with companies to sell their products online, like smartphones.
Impact on Amazon and Tata
As stated earlier, new rules don’t allow e-commerce platforms to list their affiliated companies as sellers on the platform. But Amazon, in this case, has an indirect stake in two such sellers, Cloudtail and Appario.
Amazon said in the meeting that small businesses already hit hard by the Covid-19 pandemic are likely to be most adversely impacted by these changes.
Furthermore, it said that some clauses in the new rules are already being covered in the existing laws on consumer protection.
Tata also opposed the rules by saying that these rules would stop its joint venture with Starbucks in India. The American won’t be able to sell its products on Tata’s marketplace website.
What the government says
The government defended the new laws and the Consumer Ministry Official said these are in the best interest of consumers.
The laws were brought amid the rising complaints by brick-and-mortar retailers that Amazon was bypassing foreign investment laws with its complex business structures. Amazon denied indulging in any such activities.