The government has tightened rules for ecommerce companies such as Flipkart and Amazon, barring them from selling products of businesses in which they have a stake and laying down new conditions for sale of goods on their platforms.
“An entity having equity participation by ecommerce marketplace entity or its group companies, or having control on its inventory by ecommerce marketplace entity or its group companies, will not be permitted to sell its products on the platform run by such marketplace entity," the government said in a notification on Wednesday.T
The commerce and industry ministry also said an ecommerce marketplace entity cannot mandate any seller to sell its products exclusively on its platform. Several companies, especially mobile phone makers, prefer selling their products exclusively on a particular ecommerce platform.
CNBC-TV18 caught up with Kunal Bahl, co-founder and CEO, Snapdeal; Sanjay Sethi of Shopclues and Akash Gupt of PWC India to discuss the impact of the new norms on their businesses as well as the industry as a whole.
There were a lot of grey areas in the earlier FDI guidelines for ecommerce companies and yesterday's (Wednesday) enhanced guidelines were meant to close out any such potential grey areas that were creating circumvention of the policy," said Bahl.
At the end of the day the purpose of ecommerce marketplaces is to create a platform that can connect the long tail of demand, the long tail of supply in the country and provide MSMEs the ability to reach consumers nationwide which obviously was getting hampered because certain related party sellers were crowding out the small seller, he said.
"The challenge that our space has been facing is that particular sellers were getting a disproportionate amount of discounting funded by the marketplaces which was creating a negative impact both for the sellers on the marketplace as well as offline retailers," Bahl added.
This is definitely a welcome change, welcome clarification, said Sethi.
"I do believe it has come quite late. Over a period of time, many entities have misused, misunderstood or deliberately tried to circumvent the policies which has unfortunately led to press note 2, press note 3 that came in earlier and now this clarification," he said.
If you go through this policy point-by-point, it very clearly points out every violation that was happening in the market, Sethi added.