CAIT: Online discounts violating some norms

Nagpur: Confederation of All India Traders (CAIT) had earlier taken on foreign e-commerce giants on the grounds that the discounts offered in online sales violate the policy on retail FDI.

It has now shot off letters to over 40 manufacturers of consumer brands seeking a clarification on the issue.

CAIT, which is headed by Nagpur-based chartered accountant BC Bhartia, has questioned whether the e-commerce portals are offering discounts or the price cut is directly from the manufacturers.

“If it is found that the manufacturers are allowing discounts for sales only through e-commerce portals, then CAIT may approach the Competition Commission. It amounts to unfair trade practice if the manufacturers are offering heavy discount on the same product sold on an e-commerce portal but not to the regular traders down the chain,” said Bhartia. If the discount comes from the portals, then it is a violation of the FDI policy, he said.

CAIT, an apex association, claims to have membership of 40,000 trade bodies across the country.

CAIT has already challenged the festive discounts offered by e-commerce giants like Amazon and Flipkart through a petition filed in the Rajasthan high court a couple of months ago. The plea contends that offering of discounts by a foreign e-commerce company amounts to violation of the FDI policy. Notices before admission have been issued in the case, said Bhartia.

The discounts offered by the e-commerce companies are a violation of the ‘press note 3’ of Department of Industrial Promotion and Policy (DIPP). “In India, under the FDI policy, foreign e-commerce companies are only allowed to provide a platform for sales, rather than having their own inventory and carrying out direct trade with consumers. CAIT’s petition says, since the discounts are being offered on e-commerce portals, it means that they are directly holding the inventory and selling the goods to consumers,” said Bhartia.

In a parallel move, CAIT had also approached minister of commerce Piyush Goyal. Last week, the minister called a meeting of CAIT and representatives of e-commerce companies. The latter maintained that the discounts are offered directly by the manufacturers. In view of this, it was decided to write letters to the manufacturers also, said Bhartia.

According to a press release issued by CAIT, both Amazon and Flipkart categorically said during the meeting that the portals are not offering any discounts, and it is various brands which are cutting the price. Both the company’s representatives also said it is the brands which give their exclusive products to sellers and they have no role on it.

This reflects dual policy of brand manufacturers, with different set of prices and discounts structure for offline and online trade. This amounts to discrimination and leads to unfair business practices, which is not allowed under business norms, says CAIT.