Activists cheer new ecomm norms, many for applying rules to local companies

March 2, 2019 written by

Global antitrust practitioners are lauding the new FDI in ecommerce rules, which kicked in last week, and said the new rules will prevent technology companies from forming monopolies in India.

They termed it as a step in the right direction to protect smaller businesses which sell on platforms like Amazon. However, some felt that the rules should not be restricted only to companies with foreign ownership, but be applicable to domestic players as well to prevent it from benefitting a select few companies. Enforcing the new regulations only for firms that have foreign ownerships or investments could create a non-level playing field in India’s burgeoning e-commerce sector, they said.

In a post on Twitter, Lina Khan, an antitrust law and competition policy researcher, known for being a vocal critic of the business practices of Amazon, said India’s rule responded to a problem sellers on Amazon routinely face where, “Amazon will spot their best-selling products and then produce an Amazon-branded version, demoting them in search listings and eating into their sales”.

Khan argued that while for some the rule was akin to protectionism, it was more of a structural separation, a method used by US lawmakers in the past to ensure media diversity, dispersion of power or system stability. “The idea is you can either run the marketplace or sell your goods on the marketplace, but not both,” Khan tweeted.

VivekWadhawa, a technology entrepreneur, agreed with Khan and said: “the US needs to learn from India and prevent predatory tech monopolists from destroying entire industries”.

RehanYar Khan, Managing Partner at Orios Venture Partners, and an early-stage backer of Indian internet firms such as ride-hailing firm Ola and software product startupDruva, said: “The rule only applies to companies that have received foreign

investment to clip their wings so that domestic players can steal market share”.

Many in the startup ecosystem argued that the new rules favoured domestic players and ignored aspects which were actually benefiting consumers.

“It’s not the policy makers job to dictate how businesses are run if they are benefiting customers. I think this whole step is retrograde,” said Avnish Bajaj, founder at Matrix Partners, a venture capital fund.

Haresh Chawla, a partner at private equity fund, True North, said it was Amazon and Flipkart’s efforts to keep finding loopholes in the law that forced the government to finally step in. “The argument that there has been a flip-flop in India’s laws is wrong. There was already a law stating that inventory-based marketplaces are not allowed in India,” Chawla said.

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