Commerce and industry minister Piyush Goyal has warned ecommerce companies of strict action if they don’t halt predatory pricing on their platforms, flouting foreign direct investment (FDI) rules, said officials with knowledge of the matter. The issue figured in a discussion Goyal had with Amazon India head Amit Agarwal on November 5, they said. “Ecommerce companies need to comply with the rules we have told them to stop predatory pricing,” said one of the officials. The issue of violating norms is not Indiaspecific as Amazon also faces antitrust probes in the US and the EU, the official said. The marketplaces have said repeatedly that they are in compliance with Indian rules and that any discounts were being offered directly by sellers to buyers.
One area of interest in the US is whether Amazon has an unfair advantage over third-party merchants when it competes with them to sell similar products on its own platform, the person said. The Competition Commission of India said last year that Flipkart and Amazon were not dominant among online marketplace platforms in the country. They, therefore, didn’t contravene Section 4 of the Competition Act, which deals with anti-competitive issues, it had said. “We continue to engage with the government and have emphasized how we have consistently worked closely with local Kirana stores and other small businesses in the last six years,” an Amazon spokesperson told ET. “We have over 23,000 Kirana stores as IHS (I Have Space) stores across 350 cities, over 14,000 Amazon Easy stores across 22 states and nearly 60% of our top 2,000 sellers are offline retailers.” Govt Against Knee-jerk Response while Addressing Retailers’ Issues The Department for Promotion of Industry and Internal Trade (DPIIT) is looking at possible instances of FDI violation.
It has held multiple meetings with the online marketplaces as well as brick and mortar lobby groups that have accused the platforms of breaking the rules. The Confederation of All India Traders (CAIT) has often complained about predatory pricing and discounts, along with other violations of the FDI policy, particularly during the festive season. “Their business model is based on misplaced logic, funding negative cash flow through investors and monopolizing the market,” CAIT secretary general Praveen Khandelwal said in a statement on Thursday. Ecommerce companies such as Flipkart and Amazon may generate up to $6 billion, or Rs 39,000 crore, in sales this festive season, according to consultancy RedSeer. A clarification of Press Note 2 issued last December had barred marketplaces from selling products from vendors in which they have an equity interest. They also can’t enter into deals with any brand to sell products exclusively on their platforms. These norms came into force in February.