As ecommerce marketplaces gear up for the final rundown of festive season sales, they are now facing the brunt of traders’ body Confederation Of All India Traders (CAIT) as it seeks a blanket ban on the festive sales.
In a letter to the minister of commerce and industry, Piyush Goyal, the traders’ association has alleged that in the festival sales declarations, ecommerce companies are offering deep discounts which runs against the mandate of Press Note No.2 of Foreign Direct Investment (FDI) Policy,2016 later amended in 2018.
Here Are Its Objections
- Under new FDI ecommerce policy, marketplaces are permitted to enter into transactions with sellers registered on its platform on B2B basis. CAIT alleges that “ecommerce portals are deeply engaged in B2C Business and the quantum of B2B Business is almost negligible.”
- The policy states that ecommerce marketplaces will not exercise ownership or control over the inventory i.e. goods purported to be sold. CAIT is emphasising that since “sales can be organised only by the owners of inventory and since these companies are not the owners of inventory how can they offer discounts on the products owned by sellers registered on their platform which establish the fact that these Companies hold control over the inventory which is against the FDI Policy.”
- As per FDI policy, ecommerce marketplaces will not directly or indirectly influence the sale price of goods or services and shall maintain a level playing field. However, CAIT is emphasising that “by offering deep discounts ranging from 10% to 80% on their ecommerce portals, these companies are clearly influencing the prices and create an uneven level playing field which is in direct contravention of the policy.”
CAIT also called for an investigation on how these companies are flouting FDI norms and accordingly action should be taken against them. It is to be noted that this is the first festive season sale since the changes in FDI ecommerce rules, which came into effect on February 2019.
Interestingly, ecommerce marketplaces have been asked to make reports from their statutory auditor public on their websites by September 30 to show that they are following the new FDI norms.
The week started with reports of ecommerce players reaching out to sellers, with reduced commissions to enable customer discounts by the sellers for festive season sales. Sellers said that this was the highest margins offered by these companies to merchants, as compared to previous year festive sales. Further, companies have continued announcing grand plans to create buzz around the upcoming festive season sale.