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The new legislation, which was introduced by the Indian government last year, but came into effect on Friday, is an attempt to level the playing fields between corporate giants and domestic sellers.
Amazon shares were also taking an additional hit -- and falling into bear market territory Friday -- after its chief financial officer said capital spending would increase this year.
Under the new Indian laws, foreign online retailers will be banned from negotiating exclusives on products, offering deep discounts and from selling items that they hold an equity stake in or that they make exclusively.
"E-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain level playing field," part of the new law states.
Both Amazon and Walmart’s Flipkart — which it owns a majority stake in -- were both forced to pull thousands of products off their virtual shelves.
The new regulations could also drastically cut both companies' growth plans in the key market, where each has already invested billions.
India’s Prime Minister Narendra Modi enforced the new rules after receiving complaints from local shops and domestic sellers about the retail giants' growing dominance.
Between them, Amazon and Flipkart account for more than 70 percent of online sales in India.
Both companies also petitioned for extensions to the Indian government but were ultimately denied.