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Flipkart, Amazon Violate FDI Policy; Cannot Offer Discounts, Claims Trade Body

The lobby has urged Union Commerce Minister to take strong action.

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Flipkart Amazon Violate FDI

This is now becoming an annual tradition now.

After 2015 and 2016, this year too, The Confederation of All India Traders (CAIT) has lodged a strong protest against e-commerce portals for carrying their festive season sale, terming them as illegal.

Do such protests really matter now?

CAIT: Discounts By Amazon, Flipkart Are Illegal

Newly appointed Union Commerce Minister Suresh Prabhu has now a major task at hand, as The Confederation of All India Traders or CAIT, one of the strongest lobby of offline retailers and merchants have lodged a strong protest against e-commerce portals for their discount offers.

The lobby has met Minister Suresh Prabhu, and asked him to take strong action against these e-commerce portals, for breaking Indian laws.

The reason for the protest is that, ecommerce portals are offering massive discount in a “blatant violation” of the FDI (foreign direct investment) policy.

In their statement, CAIT said,  “Amazon has declared Great Indian Festival Sale from 21 September to 24 September, 2017 and Flipkart has conducted Big Billion Day Sale from 20-24 September 2017, Snapdeal has announced Unbox Diwali Sale from 20 to 25 September 2017, Jabong Sale from 20 to 24 September 2017, Myntra Sale from 20 to 24 September 2017, Shopclues has announced Maha Bharat Diwali Sale from 20 to 28 September 2017 which is a blatant violation of the guidelines issued by the DIPP,”

The Logic Against Discounts By Traders Body

In their complaint to the Commerce Minister, Trade Body has claimed that ecommerce portals, under the new FDI policy, cannot offer discounts.

Their statement said, “The Confederation of All India Traders has charged Amazon, Flipkart and Snapdeal etc. for violation of FDI policy for e-commerce of the Government issued on 29 March, 2016 by Department of Industrial Promotion & Policy, Ministry of Commerce.”

The traders body is alleging that as per DIPP policy, these ecommerce portals cannot influence the pricing of products, that is, they cannot sell them below MRP. Besides, the market places cannot engage in B2C activities, but only B2B should be their focus.

The complaint further said: “Under FDI policy these companies can not undertake retail trading activities but these e-commerce portals being habitual offenders of (the) government policies are circumventing the law and engaged in B2C (business-to- commerce) activities which is prohibited for e-commerce marketplace portals,”

CAIT Secretary General Praveen Khandelwal also went one step further, and alleged that ecommerce portals advertising their sales and discounts on billboards and newspapers is also illegal: because they are addressing the consumers directly.

He said, “They (e-commerce firms named) do not have ownership of the inventory of the products purported to be sold on their technology platform, how can they offer discounts or discounted prices on the products for which they are not the owners-questioned trade leaders, “

While Myntra and Jabong have refused to comment, there has been no reply or comments from Flipkart, Amazon, Snapdeal or Shopclues.

FDI Policy Doesn’t Allow Discounts?

Nonetheless, the allegation levied are genuine, as the FDI laws mentioned in the complaint has, in fact, been endorsed by DIPP in the past.

Last year, while announcing new laws and rules pertaining to FDI in ecommerce, Govt. of India had said that market place providers, that is Flipkart and Amazon cannot ‘influence’ the pricing of the products sold on their websites and “a single seller (vendor) may only participate in 25% of the overall sales in the marketplace.”

It is very clear that both of these rules have been broken during the Dussera discounts just ended.

However, the protest from CAIT has come at an interesting period, because Dussera season sale has ended on all portals, but the biggest of them all: Dhanteras and Diwali festive season sale is due in October; and any action by the Govt. against these ecommerce portals can make some dent in their plans.

Do you think offline traders are right in protesting against ecommerce portals? Do share your views by commenting right here!

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