SUMMARY
In July, Delhi HC banned the sale of products of direct selling companies on ecommerce sites without authorisation
Direct selling companies are protesting the deep discounts on their products
This is not the first case of conflict between direct selling companies and ecommerce marketplaces
Following Delhi High Court’s July order stopping ecommerce companies from selling products of companies such as Amway and Avon without prior permission, Amazon has reportedly appealed in the Supreme Court to challenge the Delhi HC’s order.
Companies such as Amway, Oriflame and Avon, who sell products directly to consumers and are not usually found at typical retail locations are called direct selling companies.
According to a media report which cited a senior industry official, “While direct selling companies contribute a minuscule percentage to sales on ecommerce platforms as of now in India, Amazon is of the opinion that any court order restraining ecommerce platforms to sell specific categories of products might set a precedent for other categories as well.”
Also, the report noted an Amway India spokesperson who said that the matter is currently sub judice. “However, we believe that the findings of the Delhi High Court are correct and in the interest of the consumers and direct sellers. We are confident that the Hon’ble Supreme Court will arrive at a similar finding,” the spokesperson reportedly added.
Further, the chairman of the India Direct Selling Association (IDSA) Vivek Katoch was earlier reported to have said that, “The HC’s judgement is expected to provide a level-playing field to direct sellers. It also clarifies that neither ecommerce players nor sellers can claim rights on products.” IDSA is an industry body representing companies such as Avon, Modicare, Tupperware, Unicity, Amway, Oriflame and more.
IDSA has earlier alleged that the deep discounts offered by ecommerce platforms adversely affect direct sellers actual sales, which in turn cause a significant dent to their businesses.
The Ongoing Conflict
This is not the first case of conflict between direct selling companies and ecommerce marketplaces. Earlier this year, Delhi-based direct selling company Modicare has taken Amazon to Delhi High Court for selling its products illegally. At that time, Delhi HC had ordered Amazon sellers — M/s. Laxmi Enterprises and M/s. Modicare DP Store to stop selling, advertising, offering for sale or displaying Modicare products on Amazon India store.
To which, Amazon had then said that it is an intermediary as defined under the IT Act and thus protected by the safe harbour provisions under Section 79 of the IT Act.
Also in 2018, the US-based direct selling giant Amway has reportedly sent a notice to ecommerce players Flipkart for allowing Amway’s direct sales representatives for selling its products ‘illegally’ on its platform. The company said it had earlier sent notices to Flipkart asking it to bar such sellers from the platform but the marketplace had failed to do so, thus prompting it to approach Delhi Court.
Prior to this in 2017, India Direct Selling Association (IDSA) also wrote to players such as Amazon India, Flipkart, Snapdeal, Shopclues and Paytm, seeking action to stop unauthorised sale of products from member companies.
Following multiple such claims of deep discounts being offered by the ecommerce sites, Indian government has introduced a new FDI in ecommerce rules which came into effect on February 1. The new rules were aimed at ensuring a level playing field for offline and online retailers.
Also later, the government was reported to be planning an ecommerce policy which might set a limit on the maximum discount that can be offered on a product. Further, the platforms might have to also give detailed break-up of the discount in the pricing details to ensure ecommerce players are not the ones financing it.
Update: September 12, 2019
The Supreme Court has asked Amazon Seller Services and direct selling companies (DSCs) such as Amway, Oriflame and Modicare to approach the Delhi High Court for early disposal of their cases related to sale of products on the e-commerce platform.
Justice RF Nariman urged both sides to make a “joint request” to the Delhi HC for an advance hearing in the case before October. As of now, the long-standing dispute will get a hearing before the Delhi High Court in February 2020. The ecommerce giant was represented by senior counsel Mukul Rohatgi and counsel Ruby Singh Ahuja in the SC.
