Confederation of All India Traders (CAIT) asked the government on Friday to put a “blanket ban” on the upcoming sales on e-commerce marketplaces, Amazon & Flipkart. According to the leading Indian trader body, the e-commerce platforms deep discounts violate India’s Foreign Direct Investment policy for online trade. CAIT represents 500,000 merchants and traders in India.
The two online markets hold an annual festive season sale ahead of Dussehra and Diwali. These festivals, which are due this year in October, is when Indians make big purchases such as gold jewelry and cars
According to reports, the Walmart-owned firm, Flipkart’s sales begin 29th September and last for six days, while Amazon is yet to announce its dates. Both the e-commerce rivals promise massive discounts on everything from home appliances-to smartphones-to fashion. They have previously stated that sellers offer great deals and discounts on their platforms.
CAIT, in a letter to the federal trade minister, said that the e-commerce portals create an evident influence on the prices and create an uneven level of the playing field which is in direct infringement of the policy by offering deep discounts ranging from 10% to 80% on their websites.
Impact of FDI on e-commerce
India does not permit FDI in inventory-driven models of online marketplaces where the products and services are owned by an online marketplace that sells directly to its retail customers. Such inventory-driven models are used by Wecommalmart and Amazon in the United States.
However, the e-commerce rules have been modified since last year to protect the nation’s vast chaotic retail sector that doesn’t have the power to purchase at scale and offer massive discounts. The rules forced Flipkart and Amazon to reconfigure their ownership structures and rearrange some key vendor relationships and agreements.
Commenting on the situation, Flipkart said that more than 10,000 sellers on its platform were waiting for its ‘Big Billion Days‘ sale event.
Chief Corporate Affairs Officer at Flipkart, Rajneesh Kumar said that their company empowers the sellers to decide the best value of their products with business insights. It helps the traders to deliver benefits and savings to customers while scaling their business at the same time.
Amazon told that 500,000 sellers used the festival sales to reach customers nationwide. Majority of the sellers include small businesses, women entrepreneurs, startups, weavers, and artisans.
“Sellers decide the pricing for their products on our marketplace,” a spokesperson for Amazon said. “They offer their choice of selection to their customers across the country at prices that they deem fit,” she added.
Last month, Amazon stated in an open panel discussion, organized by India’s competitor, that it stands by all rules and doesn’t influence the pricing of products on its platform.
Strangely enough, the e-commerce marketplaces have been asked to publish their reports from their statutory auditor by 30th September to prove that they are following the new FDI norms.