gurupanguji
Financial Times has a good summary of the rules that went into effect on Feb 1, 2019.
The tl;dr version is this:
- If you are an commerce company that has foreign direct investment (think, Amazon, Walmart, others)
- You're now only allowed to be a marketplace with the following criteria
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- A marketplace has to be open and unbiased
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- So you cannot hold your own inventory
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- You cannot sell exclusive items from other invested companies
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- No FDI seller company can be > 25% of sales on an FDI marketplace
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The intent is to protect the marketplace from competition that has an advantage of ~70x spending power. The two largest online marketplaces in India are now effectively American owned - Flipkart (now owned by Walmart) and Amazon.in (owned by Amazon).
Amazon was especially effective at creatively circumventing existing rules wrt marketplaces and owning inventory - see Cloudtail. However, given General Elections in 2019, Reliance's clear intent to launch into commence and payments, the signs are certainly present if this is protectionism under the aegis of preserving competition.
There are a couple worries here:
- What prevents Amazon and others from changing the ownership levels in their ventures, whitelabel a shopping site and then continue to do the same thing?
- Where does the Government stand in balancing the pillars here - users, sellers, marketplaces and foreign marketplaces?
- What caused the change within the Government to enact this so quickly? There continue to be unsubstantiated rumors around Reliance Jio e-commerce starting in India.
- And what are the new opportunities here? Changing the weight to support an Indian giant isn't necessarily good for the smaller sellers in the long term. Is there an opportunity create a marketplace only model that would actually end up supporting local sellers?