NEW DELHI: Commerce and industry minister Piyush Goyal has warned ecommerce companies of strict action if they don’t halt predatory pricing on their platforms, flouting foreign direct investment (FDI) rules, said officials with knowledge of the matter.
The issue figured in a discussion Goyal had with Amazon India head Amit Agarwal on November 5, they said.
“Ecommerce companies need to comply with the rules — we have told them to stop predatory pricing,” said one of the officials. The issue of violating norms is not India-specific as Amazon also faces antitrust probes in the US and the EU, the official said. The marketplaces have said repeatedly that they are in compliance with Indian rules and that any discounts were being offered directly by sellers to buyers.
One area of interest in the US is whether Amazon has an unfair advantage over third-party merchants when it competes with them to sell similar products on its own platform, the person said.
The Competition Commission of India said last year that Flipkart and Amazon were not dominant among online marketplace platforms in the country. They therefore didn’t contravene Section 4 of the Competition Act, which deals with anti-competitive issues, it had said.
“We continue to engage with the government and have emphasised how we have consistently worked closely with local kirana stores and other small businesses in the last six years,” an Amazon spokesperson told ET. “We have over 23,000 kirana stores as IHS (I Have Space) stores across 350 cities, over 14,000 Amazon Easy stores across 22 states and nearly 60% of our top 2,000 sellers are offline retailers.”
Govt Against Knee-jerk Response while Addressing Retailers’ Issues
The Department for Promotion of Industry and Internal Trade (DPIIT) is looking at possible instances of FDI violation. It has held multiple meetings with the online marketplaces as well as brick and mortar lobby groups that have accused the platforms of breaking the rules.
The Confederation of All India Traders (CAIT) has often complained about predatory pricing and discounts, along with other violations of the FDI policy, particularly during festive season. “Their business model is based on misplaced logic, funding negative cash flow through investors and monopolising the market,” CAIT secretary general Praveen Khandelwal said in a statement on Thursday.
Ecommerce companies such as Flipkart and Amazon may generate up to $6 billion, or Rs 39,000 crore, in sales this festive season, according to consultancy RedSeer.
A clarification of Press Note 2 issued last December had barred marketplaces from selling products from vendors in which they have an equity interest. They also can’t enter into deals with any brand to sell products exclusively on their platforms. These norms came into force in February.
The government has said it will address retailers’ complaints but avoid any knee-jerk response.
DPIIT had last month asked Amazon and Flipkart to provide details of their top five sellers after brick and mortar trade lobby groups complained of FDI rule violations.
The department had asked marketplaces if they are compliant with the goods and services tax (GST) in letter and spirit along with details on the total business done by the top five sellers, their investments and commission agreements with vendors, variations of commission agreements with sellers, the criteria for commissions and whether they are discretionary, as well as details of any associations with payment gateways.
It had also sought lists and shares of controlled and uncontrolled sellers, distributors and retail price lists for preferred/controlled vendors.
ET reported November 7 that Goyal spoke to Agarwal about better understanding accounting practices at Amazon, the online giant’s investment pipeline and how it plans to engage with small retailers. “We remain committed to a robust marketplace that can help hundreds of thousands of Indian SMBs (small and medium businesses) thrive and scale up their business,” said the Amazon spokesperson cited above. “Our marketplace continues to thrive with these 550k+ sellers and has transformed SMBs into millionaires and crorepatis.”
ET also reported that DPIIT had written to ecommerce companies asking them how they can work with small retailers to boost such neighbourhood stores, indicating that a policy may be in the works in this regard.