The Retailers Association of India is reportedly seeking an Enforcement Directorate (ED) probe against some of the eCommerce marketplace platforms, including Flipkart, Amazon and PayTM for an alleged violation of marketplace model which the Government had defined earlier.
According to the association, online sellers are offering discounts that influence the pricing of goods, which is a violation of the model. Kumar Rajagopalan, chief executive officer at the association, told ET:
We are asking for an early investigation by the ED into the matter and we are going to take up this matter with the finance minister soon. You cannot call yourself a marketplace to qualify for 100% FDI and then indulge in retail business. Some action has to be taken in this matter.
The Delhi High Court had asked DIPP to clarify the e-commerce policy and to put in place a clear definition for the marketplace model. Thus in March, the Department of Industrial Policy and Promotion (DIPP) released a press note stating that a marketplace-based model of e-commerce means providing of an IT platform by an e-commerce entity on a digital and electronic network to act as a facilitator between the buyer and the seller.
Last month, government formally allowed Foreign Direct Investment (FDI) in eCommerce companies but at the same time limited their ability to give heavy discounts to customers. The authorities have put a clause in new rules which bars the e-commerce companies to directly or indirectly affect the pricing of products on their platform. According to DIPP:
E-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain level playing field.
While the government has allowed 100% FDI under the automatic route in business-to-business e-commerce model, there is no FDI permitted in business-to-consumer e-commerce.
The retailers’ lobby had also recently approached DIPP saying that e-commerce companies were engaging in business-to-consumer trade by selling their own brands and, thus, flouting the FDI rules.
The Retailers Association of India has approached ED as DIPP cannot do anything in this matter. It only has the mandate to draft the FDI policy. The cases of any alleged violation of the policy falls under regulatory agencies such as the Enforcement Directorate.
