SUMMARY
Amazon moved to Karnataka high court seeking a stay on CCI probe
Goyal urged ecommerce companies to follow the law of the land
Traders' associations have accused ecommerce companies of violating FDI policy
As Amazon seeks a stay on the Competition Commission of India (CCI) investigation into the business models of ecommerce companies such as Flipkart and Amazon, the union minister for industry and commerce Piyush Goyal has finally spoken out on the issue.
Speaking at a media summit, Goyal said that CCI and commerce ministry would not have to probe on the fair trade practices of the ecommerce companies if they had not contravened Indian laws and regulations. He added that ecommerce players from around the globe are welcome in India as long as they are going to stay within the limits of the law.
Goyal also asked the ecommerce players to strictly adhere to India’s foreign direct investment (FDI) policy for ecommerce marketplaces. The Indian government updated the FDI policy in December 2018 and it came into implementation in early 2019.
Broadly speaking, the policy mandated the following for ecommerce marketplaces:
- Ecommerce marketplaces can work with sellers only on a B2B basis
- They cannot exercise ownership on stock or control the inventory
- Need to provide support services to sellers
- No influence on the pricing of products
- No exclusivity contracts with any brands
Piyush Goyal’s comments and the CCI probe come a few weeks after Amazon CEO and founder Jeff Bezos visited India. During his visit, Bezos said Amazon will invest $1 Bn to digitise Indian SMBs. In response, Goyal said that Amazon is not doing India any favours by investing here and spoke out on Twitter as well. Moreover, the minister noted, “They may have put in a billion dollars but then if they make a loss of a billion dollars every year then they jolly well have to finance that billion dollars.”
Many called his remarks uncalled for at a time when the Indian economy is going through one of its worst growth phases.
Around the same time, industry watchdog CCI ordered an investigation into ecommerce business models. The government body has implied that ecommerce companies are involved in unethical practices that may violate the competition law.
Amazon has now told the Karnataka high court that CCI did not follow due process such as gathering evidence. Harish Narsappa, speaking on the behalf of CCI, noted that Amazon’s submission was “mischievous” and the company was trying to misguide the court.
Traders Square Off Against Ecommerce
Central to the ecommerce issues are India’s offline retailers and traders. Traders’ bodies have complained to many government offices about the business models of Amazon and Flipkart. The Confederation of All India Traders (CAIT) has been raising demands of the traders by organising nation-wide protests and writing to government ministries.
So far, the association has written to Prime Minister Narendra Modi, finance minister Nirmanal Sitharaman, CCI and most recently, US President Donald Trump. More or less, CAIT has highlighted three major issues every time.
CAIT has accused ecommerce companies, operating in India, of indulging in B2C trade through its subsidiaries. The traders association noted that ecommerce platforms, owned by foreign companies, can only take up the role of the mediator with the registered sellers. Both Amazon and Flipkart, which are the biggest ecommerce players in the market, are owned by US-based companies. It also alleges that ecommerce companies control inventory and offer discounts up to 80% on some of the products.
