Report: Amazon India could be violating new e-commerce rules

Dive Brief:

Amazon India appears to be in violation of new rules introduced by Indian officials late last month that clarified (and blessed) foreign ownership of e-commerce marketplaces but also introduced new limits to discounting to help brick-and-mortar retailers compete.
The rules were effective immediately. A trade group for Amazon India and rival marketplaces is mulling a request for further clarification or a delay in enforcement to September, the New York Times reports. Amazon spokesperson Craig Berman told the Times that it’s still evaluating the new rules.
India provides Amazon with its largest number of new customers after the U.S., and Amazon India's Q4 2015 sales were equal to its total 2014 sales, according to Seeking Alpha. (Amazon hasn't released numbers on its sales in India.)

Dive Insight:

E-commerce in India has been booming. The country, home to a growing, mobile-first middle class, has emerged as an attractive market for retailers, especially as China's fortunes wane somewhat.

The Indian government’s Department of Industrial Policy and Promotion announced last month it would officially allow up to 100% foreign ownership of e-commerce marketplaces. While price discounting has long been a hallmark of the intense competition among India's e-commerce players, the new rules also implement discount caps that experts say could temper the consumer enthusiasm online retailers in India have enjoyed so far.

“This should benefit brick-and-mortar retailers who have been struggling with lower footfalls and sales conversions, and lobbied successfully for online retailers to be reined back,” Venkat Viswanathan, founder and chairman of global analytics firm LatentView Analytics, told Retail Dive in email. “The policy also restrains marketplace firms from funding marketing costs or providing product guarantees, and mandates disclosure of seller contact details. All these elements would lead to lower discounts from Amazon and Flipkart [India’s largest homegrown e-retailer], and relief for brick-and-mortar retailers.”

In addition to giving a helping hand to still-emerging modern trade retailers, the new rules also promise to ensure that Amazon India, Flipkart, Snapdeal and other e-commerce players function as true marketplaces. Indian officials have decided that e-commerce companies capitalizing on the new rules must be in the business of providing technology platforms that facilitate trade between buyers and sellers, as opposed to an old-fashioned, “inventory-led model” where a retailer owns the goods it sells.

But many questions about the guidelines remain. “They’ve not given any timeline for enforcement,” Satish Meena, an analyst at Forrester Research in India, told the New York Times. “There’s no proper instructions to companies about how to implement these things. That’s a very open-ended question the government has left.” Insiders say they do not anticipate an immediate crackdown on retailers, nor is it clear what penalties they may face for breaking the new rules.

The new rules, by the way, will hold back the likes of Apple, which has worked hard to persuade the Indian government to relax foreign investment rules that would make it easier to run its own stores, rather than rely on Indian retailers, as it does now.