Update: A Walmart spokesperson told MediaNama that the company regularly offers inputs to the US and Indian governments on policy issues related to the retail sector and that this is a “past issue”. The spokesperson further told that “Walmart has had good consultations with the Government of India, including recent consultations with the Ministry of Commerce, and we appreciate the efforts they are taking to create a strong business environment and its clear commitment to consult with stakeholders on important policy issues. We look forward to further contributing to a vibrant retail ecosystem that supports India’s inclusive economic growth and is consistent with our long term commitment to India.”

Earlier: India’s norms on FDI in e-commerce is a “major change and a regressive policy shift”, Walmart had privately told the US government in January this year, reports Reuters citing a two-page representation the firm sent to USTR (United States Trade Representative). The company had also recommended that a six-month deadline extension for implementation of Press Note 2 so they could adjust to these new regulations. It also said that that there was no consultation with foreign e-commerce companies before the Press Note 2 was released on December 26, 2018, while noting that it would have “major implications” for the US e-commerce firms.

Walmart also accused the Press Note 2 of focusing “exclusively” on foreign e-commerce companies like Flipkart and Amazon since “significant modifications” to the operating models of marketplace platforms would be required. Walmart further argued in their January representation, that the new norms were not just in the favour of small domestic companies, but discriminated against foreign firms. “The purported rationale of such regulations is to protect small retail players who are seen to be threatened,” Walmart said, but added: “This argument does not account for why there should be differentiated treatment between large foreign eCommerce companies, and large domestic companies.” Interestingly, Walmart also made a note that these policies would “add unnecessary pressure to trade discussions”.

US-India trade talks had ‘no breakthrough’

This report comes just days after US and Indian trade negotiators ended talks on Friday here in New Delhi, which, as one of the officials present at the talks put it, had “no breakthrough”, per an Economic Times report. India also did not commit to any changes to its FDI in e-commerce norms. Commerce minister Piyush Goyal is set to visit Washington for talks with USTR’s Robert Lighthizer next month. The dates for that trip are not known as of now.

In January this year, the United States government said that it was concerned that India’s new FDI in e-commerce policy will harm Walmart and Amazon’s investment plans in India.

FDI in e-commerce rules

The Department of Industrial Promotion & Policy revised its guidelines on FDI in e-commerce and set out new rules for marketplaces and vendors, with relation to inventory and FDI. The new guidelines came into effect on February 1, 2019:

  1. The updated policy does not allow marketplaces to exercise control or ownership over the inventory of vendors on their platforms. For example, if a marketplace such as Amazon or Flipkart exercises ownership of control over inventory, this platform would no longer be a marketplace, but an inventory-based e-commerce business.
  2. The new policy reiterates that if a vendor sells over 25% of goods (presumably of all the goods sold on the platform) on the e-commerce marketplace, the marketplace will become an inventory based model in which FDI in not allowed. To be clear, the earlier FDI in e-commerce policy from 2017 had the same 25% cap on vendor sales, but now it places the responsibility on the marketplaces to ensure this does not happen.
  3. If a marketplace has an equity stake in a vendor/seller, or if it controls its inventory, the vendor is not permitted to sell its products on the marketplace.
  4. Warranty and guarantee of goods and services sold on marketplaces is the responsibility of the seller/vendor, and not the platform.
  5. The marketplace cannot influence prices directly or indirectly and has to offer a level-playing field all vendors/players – those controlled by marketplaces, or other vendors. Platforms will provide the same services of cash backs, fulfilment, logistics, warehousing, advertisements, marketing, payments, finance, etc across all vendors.
  6. The new norms dictate that marketplaces cannot mandate any seller to sell any product exclusively on the marketplace.

This story was updated on July 17, 2019 at 1:15 pm with inputs from a Walmart spokesperson.