Techno Blender
Digitally Yours.

related party sales: Ecommerce companies face fresh trouble as government may ban related party sales

0 47


In what could lead to fresh concerns for ecommerce and food-delivery firms, the Indian government may issue rules stipulating that ‘related party’ or ‘associated enterprises’ of internet marketplaces should not sell products or services to a registered merchant on their platforms, multiple people briefed on the matter told ET.

The Consumer Affairs Ministry is leading the latest round of deliberations which were held earlier this month, sources added. There has also been an inter-ministerial discussion with the Department for Promotion of Industry and Internal Trade (DPIIT) and The Ministry of Electronics and Information Technology ( MeitY).

If these discussions eventually fructify into regulations, it will essentially mean that companies like Flipkart and Amazon India cannot offer their in-house logistics services, Ekart and Amazon Transportation Services, to their merchants, the people cited said.

Even food-delivery firms, which offer their delivery fleet to restaurant partners, would come under the purview of a proposed clause on related parties or associated enterprises, people aware of the matter said.

Online marketplaces do not sell products to sellers and they no longer own any stake in seller firms, after the government tightened rules in 2019. This led to Amazon discontinuing Cloudtail as a seller on its marketplace. It also announced that another joint venture partner firm Appario Retail, too will cease to exist later this year.

The thrust of the inter-ministerial discussions in recent weeks have reiterated the earlier stand taken by the government that online marketplaces should not be allowed to sell private labels on their platforms.

Discover the stories of your interest


In fact the talks, this time around, have also discussed rules stipulating that in-house branding should not be licensed to third-party sellers who will sell it online, people aware of the matter said. For instance, Amazon Solimo cannot be licensed to outside vendors if the ongoing inter-ministerial discussions fructify in new rules.

While the proposed draft regulations were first discussed nearly two years ago in 2021, etailers like Walmart’s Flipkart, Amazon and even Tata Group had raised red flags over some of the above-mentioned clauses being discussed that will affect operations of ecommerce firms as well as their brands.

According to a report in The Times of India, dated March 10, the Indian government is also mulling a ban of inventory-based ecommerce sales for both domestic and foreign etailers.

“The Consumer Affairs ministry is leading the discussions on the matter. Companies are checking the implication of the ‘related party’ or an ‘associated enterprise’ clause and legality. It’s of course still clear these clauses, if finalised, will have a direct and drastic impact on ecommerce platforms,” one of the people aware of the discussions said.

For companies like Flipkart and Amazon, majority of their orders are serviced through Ekart and Amazon Transportation Services, respectively. In fact, Amazon recently introduced Prime Air in India for faster delivery of goods in metro cities, as reported by ET.

“Food delivery firms can’t also then service orders. Feedback informally has been given that this would have a severe impact,” this person added.

The government had first released the draft India e-commerce regulations on June 21, 2021 which triggered backlash from the industry. The original proposals had even included a blanket ban on popular flash sales. Over the past three weeks, there has been a revival in talks on finalising the ecommerce rules, multiple sources added.

“There were presentations made to the government recently on how marketplaces are also using inventory-like structure,” one of the sources mentioned above added.

During the previous round of consultations, which had happened back in 2021, one of the largest food-delivery platforms had argued against the proposals seeking to ban preferential logistical services, suggesting that provisions would place an “onerous responsibility on marketplace ecommerce entities to ensure that a third-party fulfills its obligations accurately”.

According to sources, two entities would be considered associated enterprises, if one enterprise holds direct or indirect economic participation through equity or otherwise, or if they are affiliates. Here, being affiliates means control of two entities directly or indirectly being with one person or entity.

Emails sent to the Ministry of Consumer Affairs, Flipkart, Amazon India, Swiggy and Zomato didn’t elicit any response as of Monday press time.

In-house labels, other rules

The latest discussions have also encompassed some issues such as ecommerce firms should not be using any of its platform data which can give unique insights to its associated enterprises leading to any unfair advantage. While the exact nature of these ‘advantages’ have not been spelt out, a common example is if a marketplace is introducing in-house brands in product categories doing well on the platform.

“While the talks have happened, they (government) are treading cautiously this time… conversations have taken place with some of the etailers informally,” one of the person briefed on the matter said.

Offline traders and store owners have been complaining to the government that etailers use various data points through their own platforms to come up with new products and services putting offline stores at a disadvantage.

Ecommerce firms, to counter these charges, have been trying to onboard offline kirana stores on their marketplaces to take them online while maintaining they remain compliant with relevant laws of the country.

Private labels, which were scaled heavily by etailers pre-pandemic, have drawn criticism from offline traders as well. However, ecommerce arm of homegrown enterprises like Tatas and others would also be impacted as per the thrust of the current discussions which may result in final rules that no marketplace should directly or indirectly sell private labels or license them to sellers in India.

Flipkart, Amazon have their own labels like Amazon Basics, Smartbuy, MarQ among others but Tatas also sell a host of grocery products on their Tata Neu app as well as on BigBasket–where the conglomerate owns a majority share.


In what could lead to fresh concerns for ecommerce and food-delivery firms, the Indian government may issue rules stipulating that ‘related party’ or ‘associated enterprises’ of internet marketplaces should not sell products or services to a registered merchant on their platforms, multiple people briefed on the matter told ET.

The Consumer Affairs Ministry is leading the latest round of deliberations which were held earlier this month, sources added. There has also been an inter-ministerial discussion with the Department for Promotion of Industry and Internal Trade (DPIIT) and The Ministry of Electronics and Information Technology ( MeitY).

If these discussions eventually fructify into regulations, it will essentially mean that companies like Flipkart and Amazon India cannot offer their in-house logistics services, Ekart and Amazon Transportation Services, to their merchants, the people cited said.

Even food-delivery firms, which offer their delivery fleet to restaurant partners, would come under the purview of a proposed clause on related parties or associated enterprises, people aware of the matter said.

Online marketplaces do not sell products to sellers and they no longer own any stake in seller firms, after the government tightened rules in 2019. This led to Amazon discontinuing Cloudtail as a seller on its marketplace. It also announced that another joint venture partner firm Appario Retail, too will cease to exist later this year.

The thrust of the inter-ministerial discussions in recent weeks have reiterated the earlier stand taken by the government that online marketplaces should not be allowed to sell private labels on their platforms.

Discover the stories of your interest


In fact the talks, this time around, have also discussed rules stipulating that in-house branding should not be licensed to third-party sellers who will sell it online, people aware of the matter said. For instance, Amazon Solimo cannot be licensed to outside vendors if the ongoing inter-ministerial discussions fructify in new rules.

While the proposed draft regulations were first discussed nearly two years ago in 2021, etailers like Walmart’s Flipkart, Amazon and even Tata Group had raised red flags over some of the above-mentioned clauses being discussed that will affect operations of ecommerce firms as well as their brands.

According to a report in The Times of India, dated March 10, the Indian government is also mulling a ban of inventory-based ecommerce sales for both domestic and foreign etailers.

“The Consumer Affairs ministry is leading the discussions on the matter. Companies are checking the implication of the ‘related party’ or an ‘associated enterprise’ clause and legality. It’s of course still clear these clauses, if finalised, will have a direct and drastic impact on ecommerce platforms,” one of the people aware of the discussions said.

For companies like Flipkart and Amazon, majority of their orders are serviced through Ekart and Amazon Transportation Services, respectively. In fact, Amazon recently introduced Prime Air in India for faster delivery of goods in metro cities, as reported by ET.

“Food delivery firms can’t also then service orders. Feedback informally has been given that this would have a severe impact,” this person added.

The government had first released the draft India e-commerce regulations on June 21, 2021 which triggered backlash from the industry. The original proposals had even included a blanket ban on popular flash sales. Over the past three weeks, there has been a revival in talks on finalising the ecommerce rules, multiple sources added.

“There were presentations made to the government recently on how marketplaces are also using inventory-like structure,” one of the sources mentioned above added.

During the previous round of consultations, which had happened back in 2021, one of the largest food-delivery platforms had argued against the proposals seeking to ban preferential logistical services, suggesting that provisions would place an “onerous responsibility on marketplace ecommerce entities to ensure that a third-party fulfills its obligations accurately”.

According to sources, two entities would be considered associated enterprises, if one enterprise holds direct or indirect economic participation through equity or otherwise, or if they are affiliates. Here, being affiliates means control of two entities directly or indirectly being with one person or entity.

Emails sent to the Ministry of Consumer Affairs, Flipkart, Amazon India, Swiggy and Zomato didn’t elicit any response as of Monday press time.

In-house labels, other rules

The latest discussions have also encompassed some issues such as ecommerce firms should not be using any of its platform data which can give unique insights to its associated enterprises leading to any unfair advantage. While the exact nature of these ‘advantages’ have not been spelt out, a common example is if a marketplace is introducing in-house brands in product categories doing well on the platform.

“While the talks have happened, they (government) are treading cautiously this time… conversations have taken place with some of the etailers informally,” one of the person briefed on the matter said.

Offline traders and store owners have been complaining to the government that etailers use various data points through their own platforms to come up with new products and services putting offline stores at a disadvantage.

Ecommerce firms, to counter these charges, have been trying to onboard offline kirana stores on their marketplaces to take them online while maintaining they remain compliant with relevant laws of the country.

Private labels, which were scaled heavily by etailers pre-pandemic, have drawn criticism from offline traders as well. However, ecommerce arm of homegrown enterprises like Tatas and others would also be impacted as per the thrust of the current discussions which may result in final rules that no marketplace should directly or indirectly sell private labels or license them to sellers in India.

Flipkart, Amazon have their own labels like Amazon Basics, Smartbuy, MarQ among others but Tatas also sell a host of grocery products on their Tata Neu app as well as on BigBasket–where the conglomerate owns a majority share.

FOLLOW US ON GOOGLE NEWS

Read original article here

Denial of responsibility! Techno Blender is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials, please contact us by email – [email protected]. The content will be deleted within 24 hours.

Leave a comment