E-commerce firms flouting FDI rules, must be deal with: Trade group

A trade association on Wednesday asked the government to take "strict action" against Amazon and Flipkart, accusing the e-commerce companies of violating India’s rules on foreign direct investment (FDI).

The Confederation of All India Traders (CAIT), which claims to represent 80 million retail stores, was among associations that met officials from the government’s department for promotion of industry and internal trade (DPIIT) on Wednesday. The department is holding a series of stakeholder consultations on issues pertaining to foreign direct investment (FDI) in e-commerce.

The meeting was held after Piyush Goyal, commerce and industry minister, said the government is considering clarifying rules on e-commerce. The government has received complaints against e-commerce companies alleging violations of the FDI policy.

Government policy allows 100 per cent FDI in marketplace e-commerce platforms and prohibits the FDI in inventory-based models of e-commerce.

“To protect the small merchants/kirana, FDI in inventory based models of e-commerce has been banned and the companies with FDI are supposed to operate the marketplace based e-commerce platform only. However, due to creative interpretations about the relationship between marketplace and sellers, these companies are controlling either the sellers on their platform or their inventory,” said Praveen Khandelwal, secretary general of CAIT.

“The control of foreign marketplace platform entities, over the sellers on their platform, enables them to do anti-competitive practices such as predatory pricing and deep discounting through capital dumping that has led to closure of a large number of small merchants/kiranas leading to job loss for lakhs of people every month,” he said.

CAIT sought a regulator to monitor e-commerce business in India. The regulator can then take immediate action against violations such as deep discounting, preferential arrangements with sellers, among others.