E-commerce curbs: Snapdeal, Shopclues support govt's 1 February deadline, assure compliance

New Delhi: Even as the government's new e-commerce curbs sting global giants Amazon.com Inc and Walmart-owned Flipkart, their local rival Snapdeal and Shopclues are cheering the move.

Smaller e-commerce players like Snapdeal and ShopClues have written to the government opposing any move to extend the 1 February deadline for online marketplaces to comply with FDI rules, and urged that pressure for such relaxations need to be "resisted strongly".

E-commerce curbs: Snapdeal, Shopclues support govts 1 February deadline, assure compliance

Representational image. Thinkstock

The government will from 1 February impose restrictions on how e-commerce firms operate, including barring them from selling products from firms in which they have an equity interest, leading to protests from Amazon and Flipkart.

The position taken by these players is in contrast to that of giants like Amazon and Walmart-backed Flipkart who have sought an extension, stating that they need more time to understand the details of the framework.

In December, the government had announced new regulations (under Press Note 2) that would bar online marketplaces with foreign investments from selling products of the companies where they hold stakes, and ban exclusive marketing arrangements.

In a letter dated 25 January, Snapdeal, which is backed by Japan's SoftBank, told the central government that some companies were using "glaring loopholes" to run a proxy inventory-based model of e-commerce.

It did not name any companies in its letter, but said "the loud protests" by some firms was an "indication of how effective this regulation" will be.

The government's move has jeopardised Amazon and Flipkart's plans to tap the fast-growing e-commerce market as it would require them to rethink their existing business structures and raise compliance costs, industry sources have said.

The rules came after small traders complained that online retailers used their control over inventory from their affiliates to create an unfair marketplace that allowed them to sell some products at lower prices. Such arrangements would be barred under the new policy.

"The timelines allowed are adequate for compliance," Snapdeal's Chief Executive Kunal Bahl wrote in a letter to the Commerce Minister.

The company said it had updated its technological processes and expects to comply and go through a "smooth transition" on 1 February.

ShopClues co-founder and CEO Sanjay Sethi echoed similar sentiments and urged for an "expeditious implementation of the policy clarifications, leaving no scope for extension to the given deadline", according to a PTI report.

He warned that "violators" may use their clout to seek extension or relaxations in the policy, "which if allowed, will perpetuate the damages already done to micro, small and medium enterprises".

ShopClues said any attempts being made to portray the clarifications (under Press Note 2) as a new policy, anti-FDI or anti-consumer is "dangerously misleading and wrong".

Traders' body CAIT had also requested the government not to accede to any demand by large e-commerce players, the US or Indian associations for changes or extensions warning that any adverse move will be opposed by the trading community "tooth and nail".

RSS-affiliated Swadeshi Jagran Manch had also recently written to the government saying that buckling under pressure from the US will directly harm the interest of 13 crore people who earn their livelihood as small entrepreneurs and their employees.

Government sources told Reuters, the government is unlikely to agree to those demands as Prime Minister Narendra Modi needs supports of small traders in the general election, which is due by May.

Following the policy announcement in December, the United States government asked officials in Delhi to protect investments in Amazon and Walmart given the "good relations" between the two countries.

"Every nation has a right to frame policies that best suit its economic and social needs," Snapdeal said in its letter.

Amazon has committed to investing $5.5 billion in India, while Walmart last year spent $16 billion to acquire Flipkart, as more and more Indians go online to shop.

--With inputs from agencies



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Updated Date: Jan 29, 2019 08:18:08 IST

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