The logo of e-commerce company Flipkart at its headquarters in Bangalore. Photo: AFP

The confrontation between the Indian government and e-commerce giants has once again come to a head after authorities came out with a proposal to amend the e-commerce rules.

The government claims that proposed rules it had announced on June 21 would protect consumers. It sought comments from relevant stakeholders by July 6. However, the proposals have created quite a stir among e-commerce players, with some even anticipating a change in their business structure and increased costs if they were to be implemented.

The revised Indian Consumer Protection (E-commerce Rules) includes several proposals that range from banning “flash sales,” which benefit only preferred sellers, to holding an online marketplace responsible for actions of a seller on its platform and requiring that it set up a complaints system.

The proposed rules cover both domestic and foreign companies operating in the Indian market.

E-commerce players are also required to ensure that related parties and associated enterprises are not listed as sellers to consumers directly. This rule will impact Amazon as it holds an indirect stake in at least two of its sellers, Cloudtail and Appario.

Walmart-owned Flipkart had rejigged its agreements with some of its sellers in order to comply.

This rule could even hurt such a domestic player as Tata Group, which is planning a super app, Tata Digital, and holds stakes in and joint ventures with many companies. Those affiliates all would be barred from offering their products on Tata’s marketplace website.

The rules were formulated following complaints from India’s brick-and-mortar retailers that Amazon and Flipkart bypass the foreign investment law by using complex business structures. They were also accused of promoting preferential sellers, influencing product prices, and following various anti-competitive practices.

Commerce and Industry Minister Piyush Goyal had recently accused leading e-commerce players of flouting laws of the land, adding that many of their practices were against the interests of consumers.

At a meeting called by Invest India, the government’s investment promotion and facilitation agency, on Saturday, the government officials pointed out that the proposed rules were meant to protect consumers and said they were not as strict as those of other countries.

However, while making their presentations, Amazon and Tata Group had argued that some of the clauses were problematic and would have huge ramifications on the industry.

Representatives of major industry bodies including the Federation of Indian Chambers of Commerce & Industry, Confederation of Indian Industry and National Association of Software and Service Companies attended the meeting. Some of the trade bodies sought more time for stakeholder response and wanted the deadline to be extended till the end of this month.