US double standards on the recent changes in India’s FDI norms for e-commerce being opposed by American giants Amazon and Walmart have been exposed by research pointing to such anti-monopolistic measures taken by the US itself in its rise to the top of the global economy and which has now turned protectionist.
The new Indian norms on foreign direct investment (FDI), which came into effect on February 1, prohibit e-tailers from selling products of companies in which they have stakes, despite both Amazon and Walmart seeking a six-month delay in their implementation.
As per the new norms, online marketplaces such as Flipkart and Amazon have been barred from selling products of companies where they hold stakes and the government has also banned exclusive marketing arrangements that could influence product prices.
These changes have a direct impact on, for instance, the US giant Walmart, which recently acquired a 77 per cent majority stake in the Indian e-retail major Flipkart.
Amazon has been forced to remove an array of products from its India website in order to comply with the new regulations.
In a paper titled ‘The separation of platforms and commerce’, Lina Khan, who is of Pakistani-origin and currently Legal Fellow at the US Federal Trade Commission, argues that with the new e-commerce rules, India has only responded to a problem faced routinely by merchants selling on Amazon.
“Amazon will spot their best-selling products and then produce an Amazon-branded version, demoting them in search listings and eating their sales,” she said.
She points that a key feature of such e-commerce majors is their structure, whereby, being integrated across lines of business they compete with the companies that now depend on them.
This structure enables dominant platforms “to discriminate against and extort value from rival businesses, threatening to undermine innovation and the competitive process”, adding that structural separation to prevent such anti-competitive practices has been a key principle in US competition policy history.
Khan cites the example of the US Congress passing a law in 1906 prohibiting railroads from transporting goods they owned and applying a similar rule to TV networks, telecom operators, as well as banks.
Noting that America has a rich history of “structural separations”, she said this policy was guided by the consideration of “whether the intermediary was a bottleneck.”
“This reflected the view that self-privileging by the intermediary risks distorting competition when producers lack real alternative channels to market.”
Earlier this month, Khan had tweeted: “India has introduced a new rule prohibiting e-commerce platforms from selling their own goods on the platform. The idea is you can either run the marketplace, or sell your goods on the marketplace, but not both.”
Urging the government to implement the new e-commerce rules without delay, the Confederation of All India Traders (CAIT) had said that “global e-commerce players in the country were indulging in all kinds of malpractices, including predatory pricing, deep discounting, loss funding and exclusivity which converted the e-commerce market into an uneven level playing field devoid of any fair competition.”
According to TRA Research Chief Executive N. Chandramouli, the US has gone overboard about the new FDI norms in e-commerce, particularly when the country has itself turned protectionist.―Newsd