Sellers Put Paytm Under Scanner For Flouting FDI Norms

The cashback offers on Paytm have brought it under DIPP‘s scanner for flouting FDI norms.

The department of industrial policy & promotion (DIPP) clarified that giving discount is a prerogative of the seller only. The clarification was in response to the query raised on Twitter, by the All India Online Vendors Association (AIOVA). AIOVA represents about 500 medium-to-large sellers on various ecommerce platforms.

AIOVA tagged  DIPP’s verified Twitter handle @DIPPGOI early this week and sought clarification on whether Paytm giving cashback over and above the seller-funded discount is within the purview of the latest FDI guidelines.

However, the response did not clarify if Paytm’s cashback strategy is in line with the latest guideline.

DIPP in a press note issued in March clarified that 100% foreign investment was allowed in online marketplaces. However, it barred these platforms from influencing retail prices or offering any discounts of their own.

Ecommerce entity offering the marketplace will not ‘directly or indirectly influence the sale price of goods or services.

Sudhanshu Gupta, vice-president at Paytm, said, “Everywhere in the world, including India, all financial services and payment companies incentivise consumers to use their products. Banks promote usage of their credit and debit cards by giving extra reward points and cashback. Paytm cashback promotions are similar in nature since they are driving usage of Paytm wallet.”

However, few experts pointed out that marketplaces are barred from influencing prices both directly and indirectly.

Sellers have sought further clarifications from the government. According to the regulation, ecommerce marketplaces are expected to be just technology platforms connecting buyers and sellers; they cannot influence the sale price of goods or services in any manner and must maintain level playing field.

A spokesperson for AIOVA said, “DIPP is responding to us on Twitter which is a great step in order to remove doubts announced in the latest policies. We have requested them to give us the procedure of application to clear all doubts that we have.” The person said the association has also sought clarity on what nodal authority should be informed about violations of the FDI policy. “This also strengthens our ongoing demand for a regulatory body for ecommerce marketplaces on lines of TRAI, Sebi, and IRDA.”

In another grievance related to the FDI guidelines, sellers had questioned their responsibility of after-sales support. “@DIPPGOI how can sellers be responsible for warranty or service of branded products as Dey are just resellers, not manufacturers #mociseva,” one said.

Sellers on online marketplaces had recently written to the Prime Minister’s Office (PMO), demanding regulations to safeguard their rights and help resolve their issues with ecommerce giants.

Just yesterday, Traders’ body, The Confederation of All India Traders (CAIT)  filed a complaint to Department of Industrial Policy & Promotion (DIPP), against Flipkart for violation of guidelines on FDI in ecommerce.

In the complaint, addressed to Secretary, DIPP, CAIT has drawn attention to an ad that appeared in newspapers, announcing the sale of an item, along with its discounted price to be available only at Flipkart, which is a marketplace.

The development was reported by ET.

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