Competition Commission of India or CCI has said that deep discounts given by e-commerce portals such as Flipkart, Amazon and others can be investigated, and this means fresh trouble for the e-commerce industry.
However, responding to complaints against Flipkart-Walmart merger, the watchdog has implicitly stated that the deal is ok, and approved by them.
What exactly is the issue here, and what will CCI do now?
Keep reading to know more!
Deep Discounts by Amazon, Flipkart Is Not Ok!
Right now, #FreedomDay sale season is going on, and right from Paytm to Amazon and Flipkart, every e-commerce portal has announced sizzling offers and deals for online shoppers.
Offline trade bodies such as CAIT has repeatedly complained against such practice, citing FDI rules.
Now, Competition Commission of India or CCI has stated that the deep discount is in fact not ok, as it violates FDI rules.
Note here, that ever since the new FDI policy was announced in 2016, this is for the first time that a major Govt. body has raised objections to the practice of discounts unleashed by e-commerce players.
The FDI policy prohibits marketplace based e-commerce players from offering discounts to users if they are flushed with VC fundings. However, they have found ways to bypass this rule.
But not anymore.
CCI has clearly stated that the discount practice “may merit policy intervention”.
They said, “There is no bar on the Commission at any point of time to examine such issues under the relevant provisions of sections 3(4) and 4 the Act and regulations made thereunder.”
Now, in case CCI resorts to an investigation, then e-commerce players like Flipkart, Amazon can find themselves in trouble.
But.. Walmart-Flipkart Deal Is OK!
At the same time, CCI has given their approval for Walmart-Flipkart deal.
This approval is significant because offline traders’ body CAIT and others had complained to CCI over this deal, citing FDI rules being broken.
Even strikes were conducted by offline retailers to stop this deal, and there were rumors that CCI can enforce structural changes in the deal.
But nothing of sorts will happen now, as the merger has been cleared by CCI.
Giving a clean chit to the merger, CCI said, “The Commission notes that majority of the concerns expressed in the representations have no nexus to the competition dimension of the Proposed Combination. Issues falling beyond the scope of the Act cannot be a subject matter of examination by the Commission, though they may merit policy intervention,”
As per CCI, the merger will have no adverse effect on the competition, and issues related to FDI violation is beyond their scope.
As a direct result of the Walmart-Flipkart merger, Govt. of India will get $2 billion as tax money.
We will keep you updated, as we receive more inputs.