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Amazon May Face Regulatory Hurdles In India

April 8, 2016, 3:54 PM UTC
US founder and CEO of Jeff Bezos poses on a lorry after handing over a two billion dollar cheque to Indian Vice President and Country Manager of, Amit Agarwal (unseen) in Bangalore on September 28, 2014. The investment will go towards raising the bar for online shopping in India. AFP PHOTO/Manjunath KIRAN (Photo credit should read Manjunath Kiran/AFP/Getty Images)
Photograph by Manjunath Kiran — AFP/Getty Images

Amazon may have hit a stumbling block in its quest to dominate e-commerce in India. According to a New York Times report this week, the e-commerce giant could be violating new rules established in the past month by the Indian government.

The turn of events present a potential blow for Amazon. It’s no secret that the technology giant has been betting on India as one of its next big markets outside the United States.

Furthermore, the Seattle-based corporation wasn’t able to gain ground in China, doubling fervor for India as the next massive opportunity for international expansion. Amazon is not only investing capital in the region, but it also acquiring startups to help expand its presence in the country.

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One of the new rules established that no individual seller can account for more than 25% of sales in an e-commerce marketplace operating in the country. Amazon’s largest seller on its Indian site, according to the Times, is estimated to account for 40% to 50% of sales on its Indian outpost, potentially in violation of the new regulations.

Other new laws include limiting the ability for marketplaces to influence seller prices. These rules also effect Amazon India-rival Flipkart.



It’s worth pointing out that Amazon’s model in India differs slightly from how it operates in the United States. The Indian government doesn’t allow companies with major foreign ownership to operate retail locations where they are selling their own inventory. Because of this, Amazon serves as a middle man between sellers and buyers, but it doesn’t sell any inventory of its own. Instead, Amazon helps sellers with warehousing and shipping goods.

In the U.S., by contrast, Amazon holds and sells its own inventory of toys, books, and more in addition to selling goods from third-party sellers.

For more on Amazon, watch: [fortune-brightcove videoid=4384566489001]

For Amazon, stakes in India are high. Amazon recently told Fortune’s Vivienne Walt late last year that India will be its biggest market after the United States within a decade. Diego Piacentini, Amazon’s senior vice president for international retail, posited that the sales opportunity for Amazon is measured in trillions of dollars.