CAIT Asks FM To Take Action Against Shopee For Predatory Pricing

CAIT Asks FM To Take Action Against Shopee On The Ground Of Predatory Pricing

SUMMARY

The industry body alleged that Shopee was launched in India with the motive to establish illegal control over the retail market in India

The letter from the industry body makes most of the same accusations as the earlier petitioner did in his petition to the Delhi High Court

In India, predatory pricing is forbidden by law under Section 4 of the Competition Act, 2002, which concerns ‘the abuse of a dominant position’ by a business

The Confederation of All India Traders (CAIT) has penned a letter to Finance Minister Nirmala Sitharaman, requesting her to take action against ecommerce platform Shopee.

The apex body of trade federations alleged that Shopee was launched in India with the motive to establish illegal control over the retail market in India by using multiple foreign registered corporate entities to mask its true ownership.

It is with the motive to establish illegal control over the retail market in India that Shopee is launched in India by using the complex camouflage of a number of corporate veils and multiple foreign entity structures.

We have covered some of these allegations earlier, when the Delhi High Court asked the centre’s response on a plea seeking to block ecommerce websites and mobile apps operated by SPPIN India Pvt. Ltd. under the name of Shopee.

The letter from the industry body makes most of the same accusations as the earlier petitioner did in his petition to the Delhi High Court, including the (true) allegation that the company is owned by the Chinese technology conglomerate Tencent.

But CAIT also makes an additional allegation—that the platform is engaged in predatory pricing practices in a bid to undercut local Indian competition. Predatory pricing refers to when a company sets absurdly low prices for its products to eliminate competition, sometimes incurring huge losses in the process.

But the large and well-funded companies that usually engage in predatory pricing can afford the losses, as long as it means eliminating the competition in the short time and increasing company profits over the long term.

“A bare perusal of the Shopee website and application will show that many products are sold on the platform at astonishingly low prices of Rs. 1/ Rs. 9/ Rs. 49 etc,” said the CAIT’s letter.

It further explained, “This is nothing but a deliberate pricing strategy adopted by the ecommerce giant with the intention of reducing prices of products to nonsensical and loss-making levels in the short-term; so as to undercut and extinguish small sellers and retailers in the long term.”

In India, predatory pricing is forbidden by law under Section 4 of the Competition Act, 2002, which concerns ‘the abuse of a dominant position’ by a business.

Update: We have updated the title to enclose the word “Chinese” within quotation marks after request from a company representative. Though CAIT alleges that Shopee is a Chinese company, that would depend on your definition of the same.