Amazon, Flipkart in legal soup: Rajasthan Court issues notice for alleged FDI policy violation

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Updated: October 1, 2019 5:43:08 PM

CAIT in its writ petition stressed on the “repeated violations of the FDI policy by Amazon and Flipkart since years,” by engaging in deep discounting, predatory pricing, loss funding and controlling the inventory.

CAIT in its writ petition claimed FDI policy violation by Amazon and Flipkart

The Jodhpur bench of Rajasthan High Court on Tuesday issued notices to India’s top e-commerce platforms Amazon and Flipkart following the writ petition filed by the traders’ body Confederation of All India Traders (CAIT) for alleged violation of the FDI policy. “The court has set 15th October for hearing the case before which Amazon and Flipkart have to reply to the notice,” CAIT’s Secretary General Praveen Khandelwal told Financial Express Online.

CAIT stressed on the “repeated violations of the FDI policy by Amazon and Flipkart since years,” by engaging in deep discounting, predatory pricing, loss funding and controlling the inventory, it said in a note. Khandelwal said that by doing so these portals have converted their marketplace model of doing business into inventory based model that violates FDI policy. “Amazon and Flipkart don’t own the inventory on their platforms so can they give discounts because the goods belong to the sellers,” said Khandelwal adding that so far no action has been taken by the government against them.

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We’re unaware of the litigation and haven’t received any notice. We’re fully compliant with FDI laws of the country. We are a marketplace player and work closely with lakhs of our sellers, artisans, SMEs across the country and help them connect with more than 160 million customers across India. We’re proud of our work to make these sellers/artisans successful and help in economic growth and job creation in India,” a Flipkart spokesperson told Financial Express Online in response to the notice issued.

Comments from Amazon will be updated as and when received even as both e-tailers have been claiming of complete compliance with the Indian laws.

Government has allowed FDI only in B2B e-commerce and had said in 2016 Press Note that an e-commerce marketplace will not, directly or indirectly, influence the sale price of goods or services, “which also renders such business as an inventory-based model,” DPIIT had said earlier this year in a statement. Nonetheless, there have been complaints about the flouting of norms by influencing the price of products and indirectly engaging in the inventory-based model. “An e-commerce platform operating an inventory-based model does not only violate the FDI policy on e-commerce but also circumvents the FDI policy restrictions on multi-brand retail trading,” the department said.

Commerce Minister Piyush Goyal had in June said, as reported by Reuters, that the government was committed to protecting small traders from predatory behaviour by foreign-funded companies.

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