Online sales on govt radar post plaints about predatory pricing

NEW DELHI: The government is keeping a close eye on the festive sales by ecommerce companies following complaints from retailers about predatory pricing and deep discounts offered on those platforms, but would avoid any knee-jerk move, an official said.

The Department for Promotion of Industry and Internal Trade (DPIIT) is keeping a watch on the sales after Confederation of All India Traders (CAIT) alleged violation of foreign direct investment rules by Amazon and Flipkart by influencing prices through heavy discounts.

“The retail platform has changed and we can’t rush into a decision,” the official told ET. “We are analysing the issue. We will see what action can be taken.”

Amazon and Flipkart kicked off the festive season sales last weekend. Offline retailers, led by CAIT, have approached the government complaining that sales can be organised only by the owners of inventory, and not by the marketplaces. As per existing norms, Amazon and Flipkart cannot undertake any sales or influence the prices since these portals are marketplaces and allowed to provide only technology platform.

Both the companies have advertised that the discounts are being offered directly by brands. Executives of some top brands have confirmed this, as ET reported in its Wednesday edition.

CAIT, however, alleged that the two ecommerce portals have warehouses in large numbers.

“When they are marketplaces, what is the need for them to keep warehouses?” said Praveen Khandelwal, secretary general of CAIT. “It shows that they are keeping stocks which…they can’t do.” He also said the cashback offered on various portals needs to stop as it influences the prices.

The DPIIT official cited earlier said the department “will look at unfair dynamics and intervene”.

The government in December had issued a clarification on Press Note 2 of FDI policy 2016, barring marketplaces from selling products from sellers in which they have an equity interest, and from entering into a deal with any brand to sell any product exclusively on their platform.

The note also stipulated the inventory of a vendor will be deemed to be controlled by the marketplace if more than 25% of the vendor’s purchases are from the marketplace entity, including its wholesale unit. The marketplace entity or its group companies cannot have control over inventory under the FDI rules.