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The online-offline battle in retail, triggered by the recent one-day sale on Flipkart, has now reached the doors of the Competition Commission of India (CCI). Even as there has been no complaint so far from any company, the Department of Industrial Policy & Promotion (DIPP) is learnt to be in the process of sending a reference to the CCI on price undercutting by e-commerce companies, seeking its views.
CCI, yet to receive any letter from the DIPP, has meanwhile begun a preliminary enquiry into the allegations of deep discounts offered by e-commerce websites. The companies concerned could be contacted if there's any need for additional information on prices and quantum of sales etc, an official said.
The CCI would launch a formal investigation into the matter only if there's a complaint against the same. Predatory pricing and dominance of firms must be established to proceed against the e-commerce firms. "In the case of Flipkart, it's only a one-day sale, and that is unlikely to be interpreted as predatory pricing," a CCI official pointed out. Another issue that needs to be ascertained is whether the entire retail sector should be considered or just the e-commerce segment, to determine market monopoly.
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While commerce and industry minister Nirmala Sitharaman has already indicated that policy issues might be clarified for the e-commerce sector, there is a lack of clarity on which ministry will deal with the core issues related to this area, a source said.
While the DIPP is meant to look at foreign direct investment (FDI) matters, the consumer affairs ministry should be the nodal point for several other matters related to retail.
Ever since the Big Billion Day sale on Flipkart on October 6, the company has been facing government scrutiny, following complaints from traders over undercutting prices and adversely affecting competition.
The e-commerce sector, pegged at about Rs 18,000 crore, has been growing at a rapid pace and is expected to touch Rs 50,000 crore by 2016. Although foreign investment is not permitted in e-commerce, the sector has taken advantage of the regulatory silence on marketplace (a format of hosting retailers on a technology platform) to attract FDI. Even international e-commerce leaders such as Amazon and eBay have used the marketplace route to enter India.
The scrutiny on Flipkart, and perhaps some other e-commerce players, has been triggered by traders who are prominent in brick-and-mortar retailing. Future Group CEO Kishore Biyani had attacked e-commerce players for selling products below manufacturing prices. The undercutting of prices was meant to destroy competition, Biyani said. On Monday, the Future group entered a strategic tie-up with Amazon to sell its private labels (its own products) on the American company's website.
In the past, the CCI could not proceed in a similar case related to e-commerce company Snapdeal, as it was not a seller itself but was only providing a platform where the seller and the buyer could meet.
Flipkart, which was conventionally an inventory-based company, shifted to marketplace, the same model as Snapdeal, a few months ago.
