The Confederation of All India Traders (CAIT) which represents 500,000 merchants and traders in India on Friday has asked the government to impose a blanket ban on the Amazon and Flipkart festival sales. The reason behind this ban is the violation of the country's foreign direct investment (FDI) rules for online retail by providing huge discounts to customers. During the Hindi festivals of Dussehra and Diwali, these two e-commerce firms hold an annual festive season sales every year. Flipkart’s six-day Big Billion Day sale begins on September 29, while Amazon’s Great Indian Festival sale is scheduled around Diwali.
“By offering deep discounts ranging from 10% to 80% on their e-commerce portals, these companies are clearly influencing the prices and create an uneven level playing field which is in direct contravention of the policy,” the CAIT said in a letter addressed to Piyush Goyal, Minister for Commerce and Industry. Further, CAIT said that since the sales can be organized only by the owners of the inventory, discounts cannot be offered from the end of e-commerce platforms.
The foreign direct investment (FDI) in inventory-driven models of e-commerce, used by Walmart and Amazon in the United States, where goods and services are owned by an e-commerce firm that sells directly to retail customers is not allowed in India. The new and modified e-commerce rules from the last year help to protect the country’s vast unorganized retail sector that does not have the advantage to purchase at scale and offer big discounts. These new rules have forced Amazon and Flipkart to reconfigure ownership structures and reconsider some key vendor relationships and agreements.
Earlier this year, the investigation has been initiated against e-commerce giants Amazon and Flipkart for alleged violation of foreign exchange law, the Enforcement Directorate (ED) on March 18 informed the Delhi High Court. A bench of Chief Justice Rajendra Menon and Justice A J Bhambhani noted the submissions of the ED that a case has been registered under provisions of the Foreign Exchange Management Act (FEMA) against the two companies and disposed of a PIL which has alleged that the e-commerce giants were violating FDI norms.