FDI e-commerce rule: Amazon’s food business, Future Retail stake acquisition in limbo

In December 2018, the Centre released new guidelines for online retail majors such as Flipkart and Amazon, barring them from selling items of companies where they hold stakes

Amazon  |  Photo Credit: BCCL

New Delhi: The government’s revised foreign direct investment (FDI) policy for the e-commerce sector poses a serious challenge to Amazon’s existing food-only retail business as the US-based online retail behemoth will discontinue selling food on its website Amazon.in from February 1, the Economic Times reported citing unnamed people aware of the development.

The financial daily highlighted that it would be a huge setback as Amazon was the sole foreign retailer to have pledged investment up to USD 500 million in the food retail business after it opened up in mid-2016. Furthermore, the latest e-commerce FDI regulations have created obstacles for Amazon to buy a stake in Future Retail.

“Amazon Retail India Pvt Ltd (ARIPL), which is a seller of foodstuff on Amazon.in, will stop selling post-February 1 in a bid to comply with the new marketplace regulations,” one of the persons with direct knowledge of the development told ET.

The publication quoted an Amazon spokesperson as saying that the firm was still assessing the new guidelines. “We remain committed to invest in India in a way that can work with the government’s vision towards the farmer and agricultural community but at present, we are still evaluating the Press Note 2 guidelines,” the company told the daily.

In December 2018, the Centre released new guidelines for online retail majors such as Flipkart and Amazon, barring them from selling items of companies where they hold stakes and restricted exclusive marketing deals that could impact product price.

According to the report, the Jeff Bezos-controlled company’s plan to acquire a 9.5 per cent stake in Kishore Biyani’s Future Retail may hit a roadblock as the new FDI rules will come into effect on February 1. The Future group is a seller on the Amazon website and after the new norms, Amazon won’t be able to piggyback on Future Retail’s brand portfolio.

Many experts are of the opinion that the latest e-commerce rules are aimed at safeguarding the interest of traditional businesses as they had complained about a huge loss of business due to adverse competition from e-commerce titans.

[“source=timesnownews”]