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Government tightens norms for e commerce platforms

Wednesday evening was the shocking evening for E-Tailers after the Government came up with a review of the policy on foreign direct investment (FDI) in the e-commerce sector and barred online marketplaces like Flipkart and Amazon from selling products of companies where they hold stakes and banned exclusive marketing arrangements that could influence the price of the product.

The ministry of commerce and Industry said that the revised norms are aimed at protecting the interest of domestic players, who have to face tough competition from e-retailers having deep pockets from foreign investors.

According to the government, Cashbacks, exclusive sales, brand launches, preferential services or programmes such as Amazon Prime and Flipkart Plus could face difficulties under the new law.  E-commerce entities such as Cloudtail, in which Amazon has a stake, will likely not be able to sell on the platform. Flipkart’s new owner Walmart may not be able to sell on the website.

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The new policy will come into force from February 1st, 2019. Majorly impacting e-commerce industry leaders that is Amazon and Flipkart.  The official said that those vendor entities like Retail net India, Cloudtail, Appario Retail owned and operated by Flipkart and Amazon control between 80% and 90% of the business on the respective platforms.

Any service like logistics warehousing, advertisement, marketing, payments, financing provided by e-commerce companies to vendors in which they have direct or indirect equity participation or common control stake, should be fair and non-discriminatory said the official.

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