India Strikes First Against Amazon and Walmart

Posted on January 3, 2019

E-commerce is no longer a novel industry, but is instead a staple of business around the world. With the establishment of e-commerce as a staple market though, we’re seeing a rise of rules to better regulate the now-burgeoning industry. India became the most recent country to pass e-commerce legislation, taking aim at titans of the trade such as Amazon and Walmart.

The government, led by Prime Minister Narendra Modi, has sought to quash concerns of small business owners over the predatory pricing tactics of major players like Amazon and Flipkart, which was recently acquired by Walmart for a cool $16 billion. As of February 1, these companies will be unable to sell products made by companies in which they hold equity, and will also be prohibited from forming exclusive arrangements with sellers.

These new regulations are designed to prevent private labels from pricing out small-time sellers. As we’ve discussed before at length, Amazon and Walmart are using private labels to dry up the markets and acquire market share.

Obviously, Amazon India was quick to deny this, citing that it operates “in compliance with the laws of the land.” The polarizing decision has been protested by Amazon and Flipkart on a united front but has been met with support from the millions of small businesses that make up India’s growing e-commerce marketplace.

A September report revealed that online commerce in India could grow 25 percent a year for the next five years, hitting $100 billion a year by 2022.”The government boasts of attracting nearly $223 billion foreign investment in the last four years, compared with about $152 billion in the previous four years.” These investments may be hurt by the new regulations but will result in a more independent Indian marketplace

There’s no telling how this battle will end, as the Modi government faces a general election in May, and may not have a majority afterward. Amazon and Flipkart also plan on protesting this decision, so legislative overhaul could end up a possibility. 

These kinds of legislation are unlikely to occur any time soon in the United States, but if you are doing business in India, keep up to date on the legislation. The regulations are aimed almost solely at Amazon and Flipkart, but you don’t want to catch yourself foul of the government of the country in which you sell. Nevertheless, the market looks ripe for e-commerce opportunity, as e-commerce truly is revolutionizing the business world both domestically and abroad.