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Walmart told the US government privately in January that India’s new investment rules for e-commerce were regressive and had the potential to hurt trade ties, a company document seen by Reuters showed.

The lobbying effort yielded no result at the time – India implemented the new rules from Feb. 1 – but the document underlines the level of concern at Walmart about the rules. Differences over e-commerce regulations have become one of the biggest issues in frayed trade ties between New Delhi and Washington.

“It came as a total surprise … this is a major change and a regressive policy shift,” Walmart’s Senior Director for Global Government Affairs Sarah Thorn told the Office of the United States Trade Representative (USTR) in an an e-mail on Jan. 7.

Just months earlier, Walmart had invested $16 billion (£12.75 billion) in Indian e-commerce giant Flipkart, its biggest ever acquisition globally.

In a statement to Reuters on Thursday, Walmart said it regularly offers input to the US and Indian governments on policy issues and this was a “past issue and Walmart and Flipkart are looking ahead”.

“Walmart has had good consultations with the government of India,” a company spokeswoman added.

In the January letter to the USTR, Walmart said it wanted a six-month delay in the implementation of the rules, but that did not happen. Washington did raise concerns about the policy with New Delhi, but India gave a non-committal response, an Indian trade ministry official told Reuters at the time.

Walmart’s problems in India highlight the regulatory complications it faces as it restructures its international business to boost growth and online sales. Mexico’s competition regulator recently blocked its acquisition of delivery app Cornershop, while in Britain it was stopped from merging its British arm Asda with rival Sainsbury’s.

In its January representation, Walmart told the USTR that India’s new policy wasn’t good for global businesses, highlighting that its foreign direct investment would help Flipkart grow and result in “significant” tax revenues for New Delhi.

“Changing rules to hinder international business following major investments … will have important implications for India FDI goals and add unnecessary pressure to trade discussions,” Walmart said in its note.

The new rules barred companies from selling products via firms in which they have an equity interest and also from making deals with sellers to sell exclusively on their platforms.

The policy, implemented by Prime Minister Narendra Modi months before his re-election in May, was seen aimed at winning the support of small Indian traders, who had long complained they were losing business due to the steep discounts offered by foreign e-commerce giants.

“The action appears in every respect … intended to placate Indian companies and local traders,” Walmart told the USTR.

Since the policy has been announced, Indian oil-to-telecoms conglomerate Reliance Industries has repeatedly talked about its plans to diversify into e-commerce.

Walmart’s document released to Reuters did not name Reliance, but the Bentonville, Arkansas-based company argued the policy discriminated against foreign firms, and not just in favour of small domestic players.

“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.”

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