The euphoria of record festival sales by e-commerce giants Amazon and Flipkart may be tempered by regulatory pressure as several retailers have questioned their practices and alleged violation of foreign direct investment norms. The Department for Promotion of Industry and Internal Trade (DPIIT) has asked the US-headquartered Amazon and Walmart-owned Flipkart to share details about capital structure and seller details, reports say.
The government authorities asked the e-tailing majors to disclose the names of the top five sellers on their platform, price list of goods of preferred vendors and the kind of support provided to sellers, a report on the Business Standard website said citing unidentified sources. The DPIIT has sent them a separate questionnaire seeking information about their capital structure, business model and inventory management system.
This government action follows complaints from members of the Confederation of All India Traders (CAIT) that represent the brick-and-mortar stores that the e-commerce companies have been violating the foreign direct investment policy in the garb of mega festive sales.
Both Amazon and Flipkart reported record sales since the festival promotional offers appeared online. Between September 29 and October 4, Amazon and Flipkart reportedly sold merchandise worth Rs 19,000 crore through the Great India Festival and Flipkart the Big Billion Days respectively. According to Bengaluru-based research firm RedSeer Consultancy, the two cornered close to 90 percent of the festival sales market by online retailers. It estimates the festival season could see total sales of Rs 39,000 crore by all e-commerce companies.
CAIT has alleged that these companies follow unethical practices by indulging in predatory pricing, the report says. The DPIIT has held several meetings separately with the two top e-commerce companies and CAIT members.
Commerce and Industry Minister Piyush Goyal has said the government is looking into complaints of alleged predatory pricing against the two. The questionnaire these companies were sent includes queries on the total number of sellers listed on their platforms, the list and the share of controlled and uncontrolled sellers; distributor and retailer price list for preferred/controlled vendors and proportion of total sales from the top five sellers, the report adds.
The two companies have also been asked to share details about their association with payment gateways, according to unidentified sources. Under the current FDI policy, the 100 percent FDI is allowed only in the marketplace model of e-commerce but not in the inventory-based model. The online retail firms are not allowed to influence the prices of goods sold on their platforms directly or indirectly. The companies, however, deny any violation of the FDI policy. They have also denied indulging in deep discounting, saying the discounts are offered by the merchants that use the platform, according to the report.
