SUMMARY
CAIT has requested an appointment with the Prime Minister to discuss the ecommerce sector issues
The traders’ body has been protesting against discounts and cashback offers for months
Will calling on PM Modi help CAIT bring new rules in place in line with its demands?
The rift between the traders’ body Confederation of All India Traders (CAIT) and ecommerce giants Amazon and Flipkart over issues like predatory pricing, deep discounting and foreign direct investment (FDI) norms has taken a new form today. The CAIT on Wednesday wrote a letter to Prime Minister Narendra Modi asking his intervention for distortions and violation of FDI Policy by the ecommerce companies. It has also requested an appointment from the PM to further discuss these issues.
In the letter, CAIT urged Modi to turn his attention to the business model of Amazon and Flipkart. The body believes that these companies are violating the Press Note 2, which updated the government’s 2018 FDI policy. It added that this has created an uneven playing field, unfair and unethical competition and destabilised retail trade of India.
CAIT Takes Ecommerce Complaints To PM Modi
While raising its concerns, the CAIT listed out the five major concerns for both Amazon and Flipkart. Here are these issues:
- Both Amazon and Flipkart have recently come out with their financial reports which reported huge losses for both the organisations. While Amazon reported a loss of more than INR 7000 Cr in the financial year 2018-19, Flipkart’s filings also reported a loss of around INR 5459 Cr. The traders’ body is keen to know how these companies are able to run their ‘big sales’ every year despite these losses.
- The traders’ body also highlighted that despite these companies filing such losses over the years, so far no tax department has cared for scrutiny of their accounts and business model. CAIT also alleged that the government is discriminating by exempting Amazon and Flipkart from any enquiry or investigation.
- While raising issues of violation of the FDI policy, CAIT claimed that both Amazon and Flipkart are openly and blatantly violating the policy right under the nose of the government. It urged Modi to look into why no concrete action has been taken so far as FDI violation helps these companies to indulge in unethical practices such as predatory pricing, deep discounts, cash burn, preferential treatment for some sellers, inventory control and influencing the prices.
- CAIT has also raised the possibility that by indulging in predatory pricing and huge deep discounting, both companies might be escaping the obligation of paying goods and services tax (GST) and income tax to a large extent. It also alleged that no department has ever assessed the possibilities of revenue losses to the government.
- The traders’ body has also raised the possibility of a nexus between ecommerce companies, brands selling on these platforms, and leading banks, creating unfair competition in the market. While CAIT alleged that these brands offer extraordinary prices exclusively to these companies which is against the Competition Act 2002, banks are advancing various cashback, schemes exclusively to these ecommerce companies, while not offering such services to the offline market.
The traders’ body also mentioned that they are not against ecommerce and believes that it is a vibrant future mode of business.
