After ecommerce platforms Amazon and Flipkart sternly denied any violation of foreign direct investments (FDI) norms by offering deep discounts, the confederation of all India traders (CAIT) has demanded clarification on who is giving these discounts on the platforms.
The communication was sent to all premier brands asking them about the deep discounts offered on their products. This move was taken after the meeting on October 11, which was convened by Department for Promotion of Industry and Internal Trade (DPIIT) as per the directive of union minister of commerce and industry Piyush Goyal. Representatives of CAIT, association that lodged complaints against the platforms, were also present at the meetings. Flipkart was represented by its COO Rajneesh Kumar and Amazon by its vice-president Gopal Pillai.
Deep Discounts Have Adverse Impact On Offline Businesses: CIAT
The CAIT also communicated that it soon plans to convene a conference of brands in New Delhi and requested them to confirm their participation. The communication from CAIT, asking for clarification, said, “since your brand is also being sold on Amazon/ Flipkart e commerce portals, we shall be grateful to you to clarify whether discounts offered on these portals are offered by you? This is necessary as we will take up this matter further with top leadership of the Government,” according to a media report.
The CAIT, stressing on the clarification by the brands, further said, “Being apex body of traders of the country representing about 7 Cr traders through more than 40 thousands trade associations across the country, we are deeply concerned on this very important and critical issue which has created an adverse impact on offline business throughout the country and we are determined to take this issue to its logical conclusion through whatever lawful course available with us.”
The traders’ body has repeatedly raised issues pertaining to the platforms offering deep discounts to customers during the festive season. In a media statement earlier this month, CAIT said that the Jodhpur Bench of Rajasthan High Court has issued notices to Amazon and Flipkart. The writ petition was filed by CAIT alleging continuous and repeated violations of the FDI policy by Amazon and Flipkart for years. The traders’ body said these companies are engaging in deep discounting, predatory pricing, loss funding and controlling the inventory. CAIT also claimed that they were converting their marketplace into the inventory-based model, a violation of FDI policy.
Following the complaints on several occasions, Goyal summoned Amazon and Flipkart for explanations on deep discounting. The companies reportedly told the government, on Thursday, that they are not flouting any rules. The companies repeatedly claimed that there are no irregularities and they are following the rules. Khandelwal had also said that CAIT is persistent with its demand that the government should initiate an immediate independent audit of both Flipkart and Amazon.
Impact of Latest FDI Guidelines On Ecommerce Players
The new policy, implemented on February 1, 2019, said that ecommerce platforms cannot have different agreements for different vendors and they cannot sign an exclusivity contract with any of them. It also said that foreign-funded websites cannot host products of companies they have a stake in. The guidelines also said that ecommerce companies can enter into transactions with sellers only on a B2B basis.
The policy also, as per many media reports, added that the ecommerce platforms cannot exercise any kind of ownership over the inventory or deep discounts. The policy resulted in disappointment among many ecommerce platforms. Walmart CEO Doug McMillon expressed his disappointment over the revised FDI guidelines during an investor call adding that he had hoped for a “more collaborative regulatory process” going forward.
Following the new norms, Flipkart reportedly started building a layer of B2B entities code-named Alpha Sellers, who will act as intermediaries between its wholesale arm, Flipkart India and its prominent online sellers in order to comply with the norms. Amazon had also lowered its commission charges by 35% for famous fashion sellers and by over 50% on specific FMCG categories to establish itself as a friendly marketplace.