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Ecommerce majors Snapdeal, Flipkart and Amazon, who conducted a number of sales recently offering discounts that went as high as 80%, are under scanner over whether they violated FDI rules by engaging in business-to-consumers (B2C) activity. Enforcement Directorate and the Reserve Bank of India (RBI) have been tasked by the Commerce Ministry to carry out a thorough check.
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1. The move has been initiated after CAIT, in its complaint, said ecommerce portals like Snapdeal, Flipkart and Amazon, which recently conducted mega sales, solicited the general public through big advertisement campaigns in print, electronic and social media. Snapdeal, Flipkart and Amazon stand accused of circumventing the law and engaging in B2C activity as 100 per cent FDI is allowed only in the business-to-business (B2B) segment.
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2. "Since they have received foreign investment, they are allowed to undertake B2B e-commerce activity and not B2C. The said advertisements addressed to the public in general tantamount to retail trading," CAIT said in a letter to the Department of Industrial Policy and Promotion (DIPP) Secretary Amitabh Kant.
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3. A Snapdeal spokesperson said: "Snapdeal is a technology platform that connects sellers with buyers to facilitate transactions. As a pure market place, we serve a rapidly expanding base of sellers, who find value in connecting with a large universe of buyers." There was no response from Flipkart and Amazon.
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4. The CAIT's argument is that since ownership of inventory is not held by the said companies, they can not offer 'sale' or 'discounts' in totality on their online portals. "Doing so establishes that they are not marketplace and as such openly flout FDI policy," it added.
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5. CAIT appealed that the three online retailers Snapdeal, Flipkart and Amazon should be restricted to conduct such sales. According to the Consolidated FDI Policy Circular 2015, ecommerce activity refers to one of buying and selling by a company through the ecommerce platform. Such companies would engage only in B2B ecommerce and not in retail trading, inter alia implying that existing restrictions on FDI in domestic trading will be applicable to ecommerce as well.
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