SUMMARY
The cashbacks offered by banks on using debit/credit cards on ecommerce platforms is violation of law: CAIT
The practice of providing cashbacks is creating an uneven level playing field, impacting the offline trade in the country: CAIT
CAIT to move to court if no action is taken by the government
The Confederation of All India Traders (CAIT) has urged Finance Minister Nirmala Sitharaman to investigate the “unholy nexus” between leading banks and ecommerce platforms, like Flipkart and Amazon, with regard to cashback offers on usage of credit and debit cards.
In a letter addressed to the finance minister, the trade body called it an unfair practice as the cashback offers were not available to consumers purchasing goods from the offline market using the same cards for making payment. CAIT said this was creating an uneven level playing field and impacting the offline trade in the country.
The trade body said major banks such as State Bank of India, HDFC Bank, ICICI Bank, Citi Bank, Kotak Mahindra Bank, HSBC, Bank of Baroda, RBL Bank, Axis Bank, among others, were indulging with Amazon and Flipkart in the “sinister game of collusion”.
“This act of the banks clearly discriminates between two sets of traders, thus violating Preamble of the Constitution of India which guarantees “equality” and restricts the consumers to purchase goods from offline shops which also violate Article 19 and Article 301 of the Constitution of India which guarantees ‘Freedom of Trade’ and Commerce in the country,” Praveen Khandelwal, secretary general of CAIT, stated in the letter.
The trade body alleged the offers by the banks and ecommerce platforms are in violation of the FDI policy and several sections of the Competition Act.
“Providing cash back exclusively to online shoppers through portal of e commerce companies like Amazon, Flipkart and others assumes the status of a cartel which leads to providing help to Amazon, Flipkart and others for indulging into malpractices of maintaining predatory pricing, exclusivity and creation of an uneven level playing field in the market which is specifically restricted under press note no.2 of the FDI policy,” the letter said.
CAIT also said that the practice encourages unfair competition in the market which is prohibited under sections of the Competition Act.
In a statement, CAIT said it had sent similar memorandums to Union Commerce Minister Piyush Goyal, Minister of State for Finance Bhagwat Karad, Reserve Bank of India Governor Shaktikana Das, Competition Commission of India Chairman Ashok Gupta, Consumer Affairs Secretary Rohit Singh, and DPIIT Secretary Anurag Jain.
The trade body said it would move to court on the issue if no action is taken by the government.
Few days ago, the industry body had also urged the government to abolish the mandatory GST registration requirement for listing on ecommerce platforms. It said the provision was preventing small traders from using ecommerce platforms to boost their sales.
It must be noted that a national e-commerce policy has been in the works for close to three years now. It aims to create a ‘fair’ and ‘non-discriminatory’ business environment in the country. The government released a draft ecommerce policy last year which called for a ban against flash sales of goods and services.
The criticism against ecommerce platforms comes at a time when the industry has seen an overwhelming growth in recent years. According to a report by Inc42, ecommerce sales are expected to capture 11.4% of the total retail market by 2026, The number of ecommerce shoppers in India surpassed 140 million in 2021.
