E-commerce giants Amazon and Walmart-owned Flipkart, recording bumper sales on their platforms in the ongoing festive season, are now facing scrutiny from the government over charges of predatory pricing and violating the existing foreign direct investment (FDI) norms.
The Department for Promotion of Industry and Internal Trade (DPIIT) has asked the two firms to disclose the names of top five sellers on their platforms, price lists of goods of preferred vendors and the kind of support provided to sellers. DPIIT has also asked the two firms to share the capital structure, business models and inventory management system of the top five sellers.
Further, the detailed questionnaire sent by DPIIT to these companies also includes queries regarding total number of sellers listed on their platforms; list and share of controlled and uncontrolled sellers; distributor and retailer price list for preferred and controlled vendors and proportion of total sales from the top five sellers. They have also been asked to share details about the association with payment gateways. These questions were sent to them after complaints were made to the department by traders body CAIT that e-commerce firms have been violating the FDI policy in order to garb mega festive sales. The members of the trade body also met Competition Commission of India officials and urged the prime minister to constitute a group of ministers to look into the matter.
E-commerce firms have so far maintained that they follow the current FDI policy and are not indulging in deep discounting. According to the firms, these brands offer those discounts. The government has permitted 100 per cent FDI in the marketplace model of e-commerce but not in inventory based model, according to the current FDI norms. The online firms are also not allowed to influence directly or indirectly prices of goods to be sold on their platforms.
During the annual festive season sale, massive discounts were offered on products listed on Flipkart and Amazon. Besides, leading banks are seen giving additional cash backs and instant discounts on purchases. CAIT said that due to this reason, trade in retail mobile sector has fallen about 60 per cent and other sectors have registered 30-40 per cent fall.
According to consulting firm RedSeer, e-commerce companies could generate up to $6 billion or `39,000 crore in sales during this festive season.
Commerce Minister Piyush Goyal recently said that the government is probing Flipkart and Amazon over the alleged predatory pricing.
DPIIT’s action
It has asked the two firms to disclose the names of top five sellers on their platforms, price lists of goods of preferred vendors and the kind of support provided to sellers. It has asked the firms to share the capital structure