Walmart Inc.’s Indian subsidiary, Flipkart Group, faces a new set of regulations aimed at restricting e-commerce businesses in that country.
India’s Ministry of Consumer Affairs on Monday released proposed rules that would affect Flipkart, Amazon.com and other companies vying for a share of India’s e-commerce market.
If passed, however, the rules would apply to Indian and foreign companies.
Companies that would be affected by the proposed regulation have until July 6 to influence them. The government can then choose to consider the proposals further or adopt them.
The ministry’s proposals include banning companies from selling or promoting their private labels; ensure that companies’ search parameters do not discriminate against domestic products and sellers; create a system to deal with grievances; identification of imported goods with a label of the country of origin; limit online “flash sales”; and the appointment of a chief compliance officer.
Walmart did not immediately respond to requests for comment.
International retail expert Dave Marcotte said every foreign company trying to do business in India must navigate a complex regulatory system designed to give its largely mom-and-pop retailers all the benefits. .
“You have to find a way to work with the government,” said Marcotte, senior vice president of retail information for Kantar Consulting.
The new rules are in fact changes to consumer protection regulations that went into effect last year, the Consumer Affairs Ministry said in its press release.
Over the past year, the ministry said, the government has heard complaints from “aggrieved consumers, traders and associations” alleging widespread fraud and unfair business practices among e-commerce companies.
Reuters reported Thursday that an internal email it obtained from the US-India Business Council, a lobbying group that is part of the United States Chamber of Commerce, said the proposals include “several policies concerning “Which” will lead to stricter electronic commerce. diet.”
A spokesperson for the Business Council said the organization had not commented on the matter.
The issues addressed in the Consumer Department’s proposed amendments mirror allegations made as part of another government agency’s ongoing investigation into Walmart and Amazon’s business practices.
The Indian Competition Commission opened the investigation in January 2020. The commission’s order said the investigation would focus on allegations that the companies have granted preferential treatment, such as a prominent list in search results, to selected sellers.
“These preferred sellers would also be affiliated or controlled by Flipkart or Amazon, directly or indirectly,” the order said.
Earlier this month, an Indian court dismissed Flipkart and Amazon’s petitions asking for an end to the investigation.
Walmart acquired a 77% stake in Flipkart, India’s largest local e-commerce platform, in August 2018. The Bentonville-based retailer has invested $ 16 billion in Flipkart as part of its largest deal at this day.
Walmart India operates 29 wholesale stores which sell to other businesses. But because India bans foreign companies from selling directly to consumers, Walmart bought Flipkart to tap India’s e-commerce market, which investment firm Morgan Stanley expects to be worth around $ 200 billion. by 2027.
The acquisition ran into a hurdle almost immediately when the Indian government adopted a mandate in February 2019 applying India’s protectionist restrictions on foreign companies.
A provision in the Indian Ministry of Commerce and Industry’s mandate prohibited retailers located outside the country from selling their own products, or those of companies they own, on their Indian e-commerce sites.
These retailers could also not enter into exclusive contracts with third-party sellers.
Walmart is committed to complying with the new rules and staying committed to doing business in India.