FDI rule violation: Flipkart, Amazon top officials meet govt officials

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New Delhi | Updated: October 11, 2019 7:09:24 AM

The meeting comes a day after a delegation of the Confederation of All India Traders (CAIT) had met commerce and industry minister Piyush Goyal on Wednesday.

Flipkart and Amazon, which jointly cover 80% of the domestic e-commerce market, had launched their six-day festive sales from September 29, taking the battle to acquire new consumers head on.

Flipkart chief executive Kalyan Krishnamurthy and Amazon India executives on Thursday met senior industry ministry officials separately, sources told FE, amid a fresh set of complaints by brick-and-mortar stores against alleged violation of foreign direct investment (FDI) rules by e-tailers in the ongoing festive sale season.

The meeting focussed primarily on the FDI rules in e-commerce, and other key aspects of the e-commerce policy, including data localisation, were not discussed, a source told FE.

It was chaired by Shailendra Singh, additional secretary at the department for promotion of industry and internal trade.

The e-tailers are understood to have told the officials that they are not indulging in any predatory pricing or offering discounts that are prohibited under the FDI rule.

The meeting comes a day after a delegation of the Confederation of All India Traders (CAIT) had met commerce and industry minister Piyush Goyal on Wednesday.

It complained that e-tailers were “involved in predatory pricing, deep discounting, loss funding and exclusivity of various products, which are not allowed under the FDI policy”, according to a CAIT statement. For their part, the e-commerce players have been maintaining that they have always complied with the FDI rules.

An Amazon spokesperson said, “We had open and transparent discussion with DPIIT officials”, adding “we are always available for further engagement, as needed”. Flipkart officials didn’t immediately comment on the issue.

Flipkart and Amazon, which jointly cover 80% of the domestic e-commerce market, had launched their six-day festive sales from September 29, taking the battle to acquire new consumers head on.

India had issued a notification in December 2018, which barred online marketplaces with foreign investments from selling products of the companies where they held stakes or controlled inventory, and also banned exclusive marketing arrangements, among others. The government, however, stated that the notification was only a reiteration of existing rules and it was forced to clarify as it had received complaints that the e-commerce players were giving discounts on products sold on their platforms, thus, violating the FDI rules.

But the notification had upset players like Amazon and Flipkart, who had sought more time to implement the rules, although the February 1 deadline to comply with the rules was not extended. US commerce secretary Wilbur Ross last week asked India to balance the interest of large e-tailers like Amazon and Walmart-backed Flipkart with offline retailers’ in its e-commerce policy.

Speaking in the presence of Ross, Goyal, however, asserted that there was no change in India’s FDI policy for e-commerce. While the government wants to promote e-commerce, it also intends to protect small brick-and-mortar stores. “E-commerce is an agnostic platform for trading, and not meant for predatory pricing. We don’t change rules mid way. We provide stable regulatory framework,” Goyal stressed. “Small retail is a sensitive subject, so India has restricted FDI in multi-brand retail at 49%.” A day later, DPIIT secretary Guruprasad Mohapatra said the government was working on a “good and sound” e-commerce policy.

Apart from the FDI issue, the government had released a new draft e-commerce policy that provided for regulating cross-border data flows and setting up storage facilities locally.

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