[Updated] Now, Flipkart Gets Clean Chit From ED In FDI Violation Case
So, now the news is coming in that Enforcement Directorate has not found anything against Flipkart that would suggest that they have violated FDI norms. Flipkart has been under the scanner for some time now and few days back rumours (read below) were afloat that they had been sent Rs. 1000 crore notice. However, rumours remain unfounded.
According to this Financial Express article, citing sources has said that, no such notice was sent and as of now they have not found anything against Flipkart. While it is not that Flipkart is completely out of the hole, because sources added that the way Flipkart’s business is structured, it fell in a fell in a grey area of law.
We have said this number of times earlier – Our archaic laws have not kept pace with the changing business circumstances. There are no specific laws that govern e-Commerce business and hence companies like Flipkart, Amazon and others are able to get away with things that may not be entirely legal.
We are not blaming Flipkart – we are blaming our laws because they sure need a revamp!
Looks like Flipkart’s troubles are not yet over.
Yet to recover after the after the much hyped Big-Billion-Day sale last week flopped miserably and it was dubbed Flopkart by irked customers, the e-commerce giant has been issued a notice by the Enforcement Directorate (ED) for flouting rules and violating regulations.
It is also being said that the retail giant has been fined Rs 1,000 crore for its violations during this sale.
Flipkart went all out to woo customers by offering steep discounts on various products. Products such as laptops, electronics, cell phones, garments, cosmetics, etc were offered at rock-bottom prices, raising concerns among all small and big traders about the viability of their future ventures. Given that most small shopkeepers and retailers cannot compete with an online giant of the size of Flipkart, their fears were not unfounded either.
Following complaints from aggrieved traders, the government had promised to look into the matter and take a call on whether more transparency is required in e-commerce retail. “We have received many inputs. Lot of concerns have been expressed. We will look into it,” Commerce and Industry Minister Nirmala Sitharaman had said.
The ED will look into complaints of predatory prices on goods sold on the hugely popular online shopping portal after traders alleged that it resorted to unfair trade practices during its mega sale on October 6, 2014.
This is not Flipkart’s first tryst with the ED, the first one being a probe into its foreign investments violating the Foreign Exchange Management Act (FEMA)
On the other hand, some journalists have squashed this Rs. 1000 Cr notice as a rumor stating that this is an ongoing investigation and nothing new.
Top ED officials deny investigating Flipkart’s billion dollar sale. Say no notice has been issued to the company on it as is being reported
— Rohini Singh (@Rohinisgh) October 14, 2014
#BigBillionDay – A sale which no one was happy about
1. Not the buyers. Because most of the items which were offered at heavy discounts came with a “Sold out” tag before the sale had actually begun. Few people who did manage to get their orders processed later got apologetic emails within a few minutes, saying that the item was out of stock. And for some items the waiting period is as long as 3 months!
2. Not the manufacturers. Whose goods were offered at heavily discounted prices. Samsung, LG and Sony expressed their disapproval of the slashed prices and even suggested legal action against Flipkart saying their brand value had been affected. Spokesmen of one leading manufacturer went on to say that buying electronics from Flipkart was no different from buying them over the grey market.
3. Not the retailers. For obvious reasons. The Confederation of All India Traders (CAIT) demanded a probe into the business model and trade practices of e-commerce companies to find out how they are offering huge discounts during the ongoing festive season.
And though Flipkart does claim to have sold goods worth Rs 600 crores to 1.5 million customers in ten hours, their happiness seems to be short lived too if the rumors about the ED serving a notice on them and the impending fine are to be believed.
IF Flipkart has indeed violated any rules, is it within the ED’s purview to serve a notice on it or launch a probe into the matter? According to us, only the Competition Commission of India (CCI) has the right to carry on such investigations.
Till we hear more from the official channels, keep watching!