Aiming to make India’s e-commerce market free from malpractices and predatory pricing, the Confederation of All India Traders (CAIT) – India’s largest traders association – has moved the Enforcement directorate (ED) against Flipkart, alleging that the online market platform is grossly flouting the Foreign Direct Investment (FDI) policy of the government and circumventing the law in its favour so as to grab market share. “The CAIT has urged the ED to investigate business module of other E-Commerce Companies also as largely everyone is circumventing the law, Flipkart is one example of that,” the trader’s body said in a press statement.
Pointing out the flaw in Flipkart’s business model, CAIT said that the online marketplace is actively engaged in the inventory-based model of e-commerce in the guise of operating under a marketplace model. Flipkart tried to circumvent the law by routing the sales via their preferred sellers, who are their affiliates, the trader’s body said. “Flipkart is also actively involved in selling ‘extended warranty’ to customers directly. Flipkart (either directly or through companies over which they have control over / ownership stake in / affiliate) is directly ‘selling a service’ to customers directly in violation of the FDI Policy,” CAIT asserted.
The FDI policy provides that an e-commerce entity providing a marketplace will not exercise ownership over the inventory i.e. goods purported to be sold. “It is a clear case of what they cannot do directly, they are doing it indirectly and this goes against the teeth of any law, including FDI policy and as such, Flipkart should liable,” said CAIT. The traders body also raised questions on Flipkart’s manufacturing products under in-house brands which, according to CAIT, is in direct conflict of interest between Flipkart and the sellers and the manufacturers on its platform.
Earlier in the week, the CAIT had filed a petition with the Competition Commission of India (CCI) raising serious objections against the $16 billion Walmart-Flipkart deal on concerns that the deal will annihilate small time traders on offline platform and create an unhealthy competition much to the disadvantage of both offline and online sellers.