Bad News For Amazon, Flipkart: No Deadline Extension On FDI Policy Says DIPP

On January 31, the Department of Industrial Policy and Promotion (DIPP) rejected requests by leading ecommerce giants — Flipkart and Amazon — to extend the deadline for the changes advised in the Press Note 2 of 2018 series on FDI policy in ecommerce.

DIPP noted in a statement that, “After due consideration, it has been decided, with the approval of the competent authority, not to extend the above deadline.”

An Amazon spokesperson told Inc42, “While we remain committed to complying with all laws and regulations, we will continue to look to engage with the government to seek clarifications that help us decide our future course of action as well as minimize the impact on our customers and sellers.”

Flipkart is yet to respond to Inc42’s queries till the time of publication.

(To read traders body CAIT’s full reaction to the DIPP ruling click here) 

On December 26, 2018, the government notified changes in FDI rules for ecommerce which prohibits large online marketplaces from controlling inventory of its partner sellers and also from having any exclusive product launches. The changes are set to come into effect from February 1, 2019.

Soon after Flipkart and Amazon wrote to DIPP seeking an extension of six months and three months, respectively. The government was also reportedly exploring the possibility of such an extension, however, the mayhem was caused by other stakeholders like traders’ body Confederation of All Indian Traders (CAIT). It had written to the Prime Minister’s Office urging his office not to grant more time to the e-tailers.

Earlier, CAIT had threatened a nationwide agitation if any extension is given to these ecommerce companies.

Sanjay Sethi, cofounder and CEO, ShopClues commented on the development and said “DIPPs notification declining the extension of Feb 1st deadline it had given to the violators of the FDI norms in ecommerce is very welcome. It is a win for the MSME community in the country moving them one step closer to a level playing field. It also sends a strong message to the violators that legal jugglery, exploiting loops holes and in general disregard for the law will have to stop now. Today, millions of MSMEs can breathe a sigh of relief.”

However, Flipkart and Amazon have reportedly told their exclusive partners that even though they won’t be able to mandate exclusivity, the business will run as usual as the brands can still choose to be exclusive to them, as they are free to adopt their channel and sales strategy.

For this, Flipkart has reportedly replaced the phrase “#Only on Flipkart” for the exclusive brands or products prominently displayed on its marketplace with “#Just Here”. Along the same lines, Amazon has also started to minimise the “Amazon Exclusive” tag displayed for the exclusive brands or models on its marketplace.

The stand by the government to reject such extension also sees an international impact as United States government had expressed reservations about India’s tough stand on ecommerce players and has told officials in New Delhi that the revised regulations will slow down investment plans of US-based retailers Amazon and Walmart.

It had said that the new ecommerce rules being discussed by DIPP are regressive and that they could potentially harm the consumers.

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.