India would be barring e-commerce companies such as Amazon and Walmart owned Flipkart group from selling products from companies in which they hold an equity interest.

In a statement released by the government, it has been stated that the new rules would come into effect from 1st February. It has been also stated that the companies would be prohibited from entering into complete agreements with sellers.

The commerce ministry in their statement stated that organizations having equity participation in e-commerce marketplace entity or its group companies, or having power on its directory by e-commerce marketplace organization or its group affiliates, won’t be allowed to sell its products on the platform operated by such marketplace organizations.

E-commerce organizations can make mass purchases via their wholesale units or other group organization, which in turn would sell the products to preferred sellers, like their associates or other organization with which they have a pact. Those sellers can then sell the products to other organization or directly to consumers, at an amazingly low price.

The new regulations pursue complaints from Indian retailers and traders, who alleged that the big e-commerce organizations are using their power over inventory from their associates, via exclusive sales pacts and constitute an illegal marketplace, which would allow the e-commerce giants to sell some products at low rates.

In October the All India Online Vendors Association (AIOVA) registered an appeal with the anti-trust body, Competition Commission of India (CCI) accusing that Amazon favours merchants, which it owns partly, such as Cloudtail, etc. A similar application was registered by a lobby group against Flipkart in May, claiming breach of competition rules by offering favoured treatment to some sellers.

Wednesday’s announcement also stated that customers who receive cash back as an incitement while shopping online should not be based on whether the product was purchased from an associate of the platform or not.

As per the new rules, facilities that are offered to vendors on an e-commerce site and by that organization’s associates should be done so as to avoid close contact and non-bigotry methods.

Well, the new rules will calm down the small traders as well as farmers who dread that U.S. firms are making use of dishonest methods to enter into India’s retail market and might wring out small corner shops that are ruling the Indian retailing sector.