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New FDI norms: Amazon to seek legal opinion to ascertain future of its food retail business case study

Answer 1

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With the new FDI guidelines announced, e-commerce companies are scrambling to restructure their business models. At present, market giant Amazon is questioning the future of its food retail business in India after the change in norms.The global retail to technology giant is also seeking legal advice for the same, as per a report in The Economic Times.

The company is consulting legal advisers about whether Amazon Retail India Pvt Ltd can sell on the marketplace after the new guidelines come into effect on February 1 . Amazon Retail India Pvt Ltd is fully owned by Amazon. In July 2017, it had received the green light to invest nearly $500 million in a food only company. Amazon Retail India Pvt Ltd sells locally sourced food products through offline and online retail stores. It is one of Amazon's multiple efforts to grab a chunk of India's growing retail market.And this is exactly where the problem arises as the new policy bars e-commerce companies from selling products on their website in which they have any sort of equity. The new policy has created a lot of confusion among the market players. A source close to Amazon said in the report that everything is convoluted and complex and the company is not sure of the way forward for its retail entity.

Amazon.in enabled operations for ARIPL only a few months ago, after a delay of more than a year in getting the government's approval. The Centre had asked Amazon to keep its retail entity away from the Indian market."We have always operated in compliance with the laws of the land and are evaluating the new guidelines to engage as necessary with the government to gain clarity so that we remain true to our commitment to India," a spokesperson quoted in the report said.

According to the new rules, Amazon's joint venture with Catamaran Ventures, Cloudtail, is no longer allowed to sell its products on the marketplace. Similarly, Walmart and its entities cannot sell any product on Flipkart.

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