MNC E-Comm Cos Like Amazon Flouting Indian Laws

The dominant e-commerce players of foreign origin are under obligation to comply with the FDI policy, which restricts them to undertake any predatory pricing, deep discounting, loss funding and even owning inventory. But these e-commerce companies are undertaking all kinds of malpractices, which are restricted under the FDI policy. -- Praveen Khandelwal, Secretary General, CAIT

Bengaluru: Big e-commerce players of foreign origin including global ecommerce giant Amazon and others are allegedly flouting the rules stipulated for e-commerce companies in India by undertaking actions like predatory pricing, deep discounting, loss funding, and through owning inventory.

In an interaction with Bizz Buzz, Praveen Khandelwal, Secretary General, Confederation of All India Traders (CAIT), said these e-commerce players are promoting specific sellers on their platforms, restricting a level-playing field for most traders.

“The dominant (e-commerce) players of foreign origin are under obligation to comply with the FDI policy (press note number 2, 2018), which restricts them to undertake any predatory pricing, deep discounting, loss funding and even owning inventory. As per policy, they need to maintain a level-playing field in the market. However, these e-commerce companies are undertaking all kinds of malpractices, which are restricted under the FDI policy. Their modus operandi is to create their own preferential sellers on their platforms. In one way or the other, they are restricting all other sellers to avail the advantages of ecommerce. This makes the competition one-sided, which is much to the advantage to these companies,” Khandelwal told Bizz Buzz.

He said that is the reason, the list of top-30 sellers in these platforms has hardly changed in the last 10 years.

“That indicates that these e-commerce players are prompting their own sellers and the rest others are merely there to clap. In that way, the Union Commerce Minister, Piyush Goyal has listed out our pain when he spoke about Amazon,” he added.

Speaking at the launch of a report on the ‘Net Impact of E-Commerce on Employment and Consumer Welfare in India,’ last month, Goyal criticised large e-com players for violation of rules.

“When Amazon says we are going to invest a billion dollars in India and we all celebrate, we forget the underlying story that this billion dollars is not coming for any great service or investment to support the Indian economy. They made a billion-dollar loss in their balance sheet that year, and they had to fill in that loss,” he had said.

He had also raised the issue of how e-commerce players were undertaking B2C sales, while the FDI rule only permitted B2B sales.

According to existing norms, the government policy allows for 100 per cent foreign direct investment (FDI) in single-brand retail trading (SBRT) and B2B cash and carry. However, in the case of multi-brand retail trading (MBRT), FDI up to 51 per cent is allowed only through the government approval route with a large number of conditions to protect the business of MSMEs and small traders.

To enable the proliferation of technology that can help MSME and kiranas, 100 per cent FDI through the automatic route has been allowed to set up the e-commerce marketplace platform. This is with a caveat that any entity operating such a technology platform will not own or control the inventory of any seller on the platform as that will be tantamount to the operation of multi-brand retail trading. Most industry watchers said that big e-commerce players of foreign origin are doing inventory-based e-commerce.

Since inventory-based e-commerce is nothing but operating a multi-brand retail store through electronic means, no FDI has been allowed in the case of such a model of e-commerce under the FDI policy. That is the reason that CAIT and other industry analysts are demanding stringent FDI rules with regard to e-commerce by the government.

“Accordingly, we feel that it is the right time the e-commerce rules under the Consumer Protection Act should be rolled out. If these two documents are rolled out, then there will be fair competition,” said Khandelwal.

He, however, clarified that the traders’ organisation was not against e-commerce and was prompting the traders to upgrade and modernise for using e-commerce as an extension of their existing retail business.

Meanwhile, persons working in some domestic e-commerce companies said while fair trade practices should be followed, restrictive rules would hamper the growth of e-commerce firms that have streamlined many issues in the Indian retail industry.

“Technology intervention has streamlined the supply chain issues to a large extent. It has also ensured better price discovery for producers. Big traders used to withhold information and manipulate pricing, which is no longer the case. E-commerce segment has also emerged as one of the major employers of formal jobs,” the person said.