Amazon and Flipkart may have a new headache as India’s e-commerce policy could also question their algorithms

• Recent leaks from the draft e-commerce policy spell more trouble for the likes of Amazon and Flipkart.
• E-commerce firms in India will have to ensure that all sellers on the platform are treated equally and should not use algorithms to give partial treatment to any seller.
• Recently, Amazon’s businesses had come under speculation for preferential treatment towards sellers that it had a stake in – Cloudtail and Appario.

The Indian government is in the final stages of formulating its draft e-commerce policy and recent leaks from the draft spell more trouble for the likes of Amazon and Flipkart.

A Reuters report said that the draft e-commerce policy would ensure that e-retail platforms in India will have to ensure that all sellers on the platform are treated equally and should not use algorithms to give partial treatment to any seller. “E-commerce operators must ensure equal treatment of all sellers/vendors registered on their platforms and not adopt algorithms which result in prioritising select vendors/sellers,” says the new policy as per Reuters.

In the initial draft released by the government in November 2019, FDI in e-commerce will only be allowed for the marketplace model and not for inventory-based selling. This means that Flipkart and Amazon, will not be allowed to own or sell through any of their entities.

However, there is now conjecture on how these entities or parties could be defined. According to an ET report, the government at its will could notify and change the definition of these parties.

Recently, Amazon’s businesses had come under speculation for preferential treatment towards sellers that it had a stake in – Cloudtail and Appario. However, the company had lashed out, calling the report “unsubstantiated, incomplete, factually incorrect”.

India’s e-commerce policy – a long time coming

The government has put together a group of secretaries to work on the e-commerce policy, who had then sent it to several departments within the government for their views. According to reports, the Department for Promotion of Industry and Internal Trade is also holding consultations with various departments from March 17-19, 2021 to finalize the policy.

A draft of the National e-commerce policy was introduced in February, 2019 and in November 2019, yet another draft on consumer protection in e-commerce also came in. The policy has already gone through multiple rounds of deliberations.

While homegrown players like Snapdeal, Paytm Mall have, more or less, found this to be a palatable draft, foreign and foreign-funded players like Amazon and Flipkart find it tough to digest.

What the Indian e-commerce policy could include

General rules laid out in the draft released on November, 2019

• It shall be a registered legal entity under the laws of India;
• It shall submit a self-declaration to this Department stating that it is in compliance with these guidelines;
• The promoter or key management personnel should not have been convicted of any criminal offence punishable with imprisonment in last 5 years by any Court of competent jurisdiction;
• It shall comply with the provisions of Information Technology (Intermediaries guidelines) Rules, 2011.
• Payments for sale may be facilitated by the e-commerce entity in conformity with the guidelines of the Reserve Bank of India.

One of the major problems in the e-commerce sector, deep discounting or predatory pricing will be looked into as well. Anti-counterfeiting measures will be taken to curb the growing menace of fake products. Another important point of the policy is the government's insistence that all local data should be stored in India.

The policy also states that e-commerce players cannot directly or indirectly influence the price of the goods or services and must maintain a level playing field. They also cannot falsely represent themselves as consumers or post reviews on their behalf.

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