India’s new e-commerce law ends retailer exclusivity for new smartphones

India’s new e-commerce law ends retailer exclusivity for new smartphones

The Government of India, through the Department of Industrial Policy and Promotion under the Ministry of Commerce and Industry, recently modified the policy of Foreign Direct Investment (FDI) in India by issuing Press Note 2 of 2018. This press note targets e-commerce activities in India, taking a very big swing at exclusivity arrangements between the marketplace platform and the sellers who sell on the marketplace platform.

These new e-commerce FDI rules prohibit marketplace “owners” from selling products on their own marketplace through vendor entities in which they have an equity interest. It also prohibits them from making deals with sellers that grants the marketplace exclusivity rights on the product. These new changes affect the two major online marketplaces in India: Amazon.in and Flipkart.com, both of which rely on foreign investment to operate in India.

This means that Amazon can no longer sell on Amazon.in through Cloudtail India, which is/was one of the largest sellers on the platform. This is because Cloudtail India itself is a joint venture company between Amazon.com and Catamaran Ventures, and the new rules prohibit vendor entities with equity interests from participating in sale activities. The rules also target exclusivity arrangements that we see for many smartphones, meaning that it now becomes illegal for the marketplace and the seller to enter into such an agreement.

If you find yourself lost in the legal and bureaucratic maze described above, restrict yourself with the end result of how it affects the Indian consumer and the Indian market. Both Amazon.in and Flipkart have to comply with these rules, and the end result is that several products that were once easily available on these platforms are no longer as easily available.

For example, the Huawei Mate 20 Pro, which was launched in November 2018 in India as an Amazon.in exclusive and which was widely sold on the platform up until yesterday, is no longer available for purchase. The LG V40 ThinQ, which was also launched in India as an Amazon.in exclusive, is no longer available either.

Similarly, Amazon’s Echo lineup of smart speakers are no longer sold officially by Amazon’s Cloudtail and now have to be purchased through other sellers (many of whom are online storefronts of smaller, local offline shops). Amazon Basics products, which had become a reliable choice for phone accessories, are also no longer officially on sale on Amazon.in by Amazon and have to be purchased through resellers on the platform. The dedicated “Exclusive on Amazon” page for smartphones now merely redirects to the Electronics market front

We don’t know when or if this item will be back in stock.

The short-term effect of these changes will be the unavailability of key smartphone products through reliable, official channels. Users will have to rely on resellers or offline stores, which definitely sets back the Indian smartphone market by a few years. While we are sure that Amazon and Flipkart will find a way out of this and still turn a profit, Indian consumers should definitely brace themselves to feel a pinch, one way or the other.

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