The ministry of commerce and industry has been grappling with many contentious issues including cross-border data flow, data localisation and deep discounting by online marketplaces in its ecommerce policy.
India’s ecommerce industry, estimated at around $39 Bn in 2017, is expected to grow to $200 Bn by 2026, according to research platform. However, setting a roadmap to reap the benefits of the digital economy, along with safeguarding the interests of all stakeholders has been quite challenging, says the report.
One of the main challenges faced by the department for promotion of industry and internal trade (DPIIT) is the deep discounting offered by ecommerce giants such as Amazon and Flipkart. The clash between CAIT and the online marketplaces has gained global attention. In December 2018, trade body US-India Strategic Partnership Forum (USISPF) had said that the new ecommerce rules being discussed by DIPP are regressive and that they could potentially harm the consumers.
The traders association has, however, been raising a red flag saying that ecommerce platforms like Amazon and Flipkart do not comply with FDI norms and offer deep discounts that put local vendors out of business. On Wednesday, Akhil Bhartiya Udyog Vyapar Mandal, along with local retailers and distributors, locked down the Flipkart’s Kanpur warehouse in Kanpur. The protestors, backed by Akhil Bhartiya Udyog Vyapar Mandal that works towards traders rights, said that online marketplaces are indulging in unfair means to shrink the business of brick and mortar stores.
The tiff between traders’ body and online marketplaces have been going on for more than a year now with festival discounting again bringing the matter to the limelight. Here is a chronological review of the developments that have been taking place.
Timeline View Of The Tiff Between Flipkart, Amazon and Traders’ Body
September 13, 2019: In a letter to the minister of commerce and industry, Piyush Goyal, the traders’ association said that during festival sales ecommerce companies offer deep discounts which stand against the mandate of FDI Policy, 2016 later amended in 2018. CAIT said that online marketplaces were turning their platforms into the inventory-based model which is a violation of FDI policy.
October 9, 2019: A delegation of the CAIT met Goyal to discuss their grievances regarding ecommerce platforms and their deep discounting methods that create an unlevel playing field for the retail traders, vendors and brick-and-mortar stores. The government has said that it would take corrective action against those flouting FDI rules. However, Amazon and Flipkart said they are following all the rules.
October 10, 2019: Commerce minister summoned ecommerce platforms over deep discounting issues and non-compliance to FDI policy norms. Goyal, addressing the delegation, said the government intends on creating a level playing field and no deep discounting or predatory pricing policies would be allowed.
October 11, 2019: Ecommerce platforms Amazon and Flipkart sternly denied violation of FDI norms during their recent sale events, at a meeting held by the DPIIT. In an important development at the meeting, however, the CAIT showed emails sent by Flipkart and Amazon to sellers, asking them to offer discounts on a sharing basis and reward them back with credits, according to CAIT secretary general Praveen Khandelwal.
October 18, 2019: The CAIT again alleged that by indulging in predatory pricing, both the companies, Flipkart and Amazon, have violated FDI norms. However, ecommerce giants rejected the charges made by CAIT and clarified that the discounts were being offered by the brands and not by the platforms to get more users, as CAIT had alleged.
October 20, 2019: To settle traders’ body’s grievances DPIIT sought a list of the top five sellers from Amazon and Flipkart. The details demanded included business done by the top five sellers, investments and ecommerce platforms’ commission agreements with vendors.
October 23, 2019: Akhil Bhartiya Udyog Vyapar Mandal, along with local retailers and distributors, locked down the Flipkart’s Kanpur warehouse. The protestors repeated CAIT’s observation that online marketplaces are indulging in unfair means to shrink the business of brick and mortar stores.
October 23, 2019: The minister of commerce and industry, Piyush Goyal, said that the ecommerce giants are cooperating with the government. While attending Sweden-India Business Leaders Roundtable, held on October 23 in Stockholm, Goyal told ET that the ministry did not receive any complaints of non-cooperation and the ecommerce platforms have assured that they are taking the scrutiny in the right spirit.
What Does The Current Ecommerce Policy Say?
The draft ecommerce policy was first made public in August 2018 by the ministry of commerce and industry. However, the policy draft faced opposition from many quarters.
The new policy was implemented on February 1, 2019. It said:
- Ecommerce companies cannot have different agreements for the vendors in similar circumstances.
- Ecommerce marketpalces cannot sign an exclusivity contract with vendors, or promote products as exclusives
- Foreign-funded ecommerce marketplaces cannot host products of vendors or companies in which they have a stake.
What Are The Demands Of CAIT?
- The government should intervene in alleged malpractices by Amazon and Walmart-owned Flipkart, including deep discounting and predatory pricing.
- Ecommerce giants should not engage in the B2C business through its subsidiaries.
- A policy for discounts on the ecommerce platforms, dismissing any prospect of market influence through heavy discounts.
What’s Next In The Battle?
While Goyal has assured that ecommerce giants are looking to cooperate with the government to solve the issue, there’s no telling how long before sellers and traders are completely convinced about the ecommerce strategy. The tussle has been going on for years and it’s unlikely to see an end this year.