The year-long tussle between traders’ body CAIT and online marketplaces such as Amazon and Walmart-owned Flipkart has propelled the government to come out with an e-commerce policy, likely to be out in 2020, which would clarify its stance on deep discounting by online retailers. Among other things, the policy would lay out the maximum discount on products and ensure that the concessions originate from sellers, a senior ministry official was quoted as saying.
The practice of pricing products at such low levels, which other firms cannot compete and, thus, forces them to leave the market, is known as predatory pricing. While the tiff between traditional players and e-tailers has gained global attention last year, the issue has further gained traction recently after e-giants kicked-off their festive sale offers.
Online players, on their part, have always maintained that they were following all the guidelines around discounting and that it is the seller offering the discounts. The traders association, however, said that e-commerce firms are clearly influencing the prices and creating an uneven level playing field which is in direct contravention of the policy and hitting the business of traditional retailers. CAIT also raised a red flag saying that e-commerce platforms do not comply with FDI norms, alleging that deep discounts on products were causing loss of GST revenue to the Centre and state governments.
Here is a chronological review of the developments that have been taking place over the last one month:
Traders’ body vs e-commerce
September 13, 2019
In a letter to the minister of commerce and industry, Piyush Goyal, the traders’ association said that during festival sales e-commerce companies offer deep discounts which stand against the mandate of FDI Policy, 2016 later amended in 2018. CAIT said that online marketplaces were turning their platforms into the inventory-based model which is a violation of FDI policy.
October 9, 2019
A CAIT delegation met Goyal to discuss their grievances regarding e-commerce platforms and their deep discounting methods that do not create a level playing field for the retail traders, vendors and brick-and-mortar stores. The government has said that it would take corrective action against those flouting FDI rules. However, Amazon and Flipkart said they are following all the rules.
October 10, 2019
Commerce minister summoned e-commerce platforms over deep discounting issues and non-compliance to FDI policy norms. Goyal, addressing the delegation, said the government intends on creating a level playing field and no deep discounting or predatory pricing policies would be allowed.
October 11, 2019
E-commerce platforms Amazon and Flipkart sternly denied violation of FDI norms during their recent sale events, at a meeting held by the Department for promotion of industry (DPIIT). The CAIT, however, showed emails sent by Flipkart and Amazon to sellers, asking them to offer discounts on a sharing basis and reward them back with credits, according to CAIT secretary general Praveen Khandelwal.
October 18, 2019
The CAIT again alleged that predatory pricing, by both Flipkart and Amazon, violated FDI norms. The e-commerce giants denied the charges claiming the discounts were being offered by the brands and not by the platforms to get more users, as CAIT had alleged.
October 20, 2019
To settle the grievances DPIIT sought a list of the top five sellers from Amazon and Flipkart along with business done by the sellers, investments and e-commerce platforms’ commission agreements with vendors.
October 23, 2019
Akhil Bhartiya Udyog Vyapar Mandal, along with local retailers and distributors, locked down Flipkart’s Kanpur warehouse. The protestors repeated CAIT’s observation on unfair means used to shrink the business of brick and mortar stores.
October 28, 2019
CAIT wrote a letter to Union Finance Minister Nirmala Sitharaman, urging the govt to probe the business model of e-commerce majors alleging that deep discounts on products were causing loss of GST revenue.