BusinessECommerce

CAIT Lock Horns With Ecommerce Companies For Violating FDI Rule

CAIT Lock Horns With Ecommerce Companies For Violating FDI Rule 1

The Confederation of All India Traders (CAIT), the apex organisation which is representing 7 crore traders in the country, has welcomed the Rajasthan High Court decision to issue notices to Amazon and Flipkart as their festivals sales violaties FDI rules. On a writ petition filed by the CAIT, the Jodhpur bench of Rajasthan High Court issued notices to ecommerce giants for violation of FDI policy of the Government.

the country, has welcomed the Rajasthan High Court decision to issue notices to Amazon and Flipkart as their festivals sales violaties FDI rules. On a writ petition filed by the CAIT, the Jodhpur bench of Rajasthan High Court issued notices to ecommerce giants for violation of FDI policy of the Government.

The Court has also issued notice to Union of India. The next date of hearing is 15th October by which all the parties have to submit reply of the notice. Justice Dinesh Mehtha heard the matter. The CAIT was represented by its counsels Rajvendra Saraswat and Abir Roy.

Writ Petition to HC

The CAIT in its writ petition highlighted the continuous and repeated violations of the FDI policy by Amazon and Flipkart since years and repeated FDI violations by them since they are engaging in deep discounting, predatory pricing, loss funding and controlling the inventory thereby converting their market place as inventory based model which is a clear violation of FDI policy. The CAIT also pleaded that these ecommerce companies are offering deep discounts which in a way is influencing the prices which is again prohibited under FDI policy. The CAIT also raised the issue that since these ecommerce companies are not the owners of inventory how can they offer discounts on the goods owned by other persons.

The High Court after hearing was pleased to issue notice, which in effect would mean they have to satisfy the High Court that their operation are in consonance with law.

CAIT Lock Horns With Ecommerce Companies For Violating FDI Rule 2

FDI Rule Violation

The CAIT criticised the sales festivals organised by ecommerce giant’s Amazon and Flipkart. In a telephonic interaction with NFAPost, CAIT Secretary General Praveen Khandelwal said the ecommerce companies game plan to organise sales event like this by giving deep discounts are against FDI rules promulgated by the Government of India. “As far as CIAT is concerned this decision of ecommerce companies holding such sales are clear violation of Press Note No.2 of FDI policy 2018,” said Praveen Khandelwal.

Ecommerce policy

While Amazon India began Great Indian Sales Festival on September 28 till October 4, Flipkart is organising Big Billion Sales Days during the same day. Both the Companies made heavy invesement for advertising campaigns and infrastructure preparation for the event.

The trade body criticised the statement of Amazon & Flipkart, which appeared in media about holding festival sales in coming days on their e commerce portals. Earlier, the CAIT had sent letter to Union Commerce Minister Piyush Goyal to ban the declared festival sales by these e commerce portals.

Traders criticise ecommerce cos

Praveen Khandelwal strongly opposed the statements of Amazon and Flipkart that appeared in media couple of days back that the festival sales empower the sellers on their respective platforms. “It is not true that these sellers can decide the prices and offer their choice of selection to customers at the prices they deem fit and offer best value of their products to consumers,” said Praveen Khandelwal. The said statement of both the Companies are devoid of any logic and just an eye wash to keep right the wrong practices they are conducting on their platform.

Praveen Khandelwal said that these companies are indulging into blatant violation of FDI Policy of the Government which has very well defined the role of e commerce entities and there is no ambiguity at all.

“The key provisions of FDI policy says that 100% FDI is allowed in e commerce marketplace model and under which ecommerce companies can act as only technical platform. It further states that such ecommerce companies will engage only in Business to Business (B2B) and not in Business to Consumers (B2C) activities on their platform and can not hold inventory. Further, the policy clearly says that e commerce entities will not influence the prices directly or indirectly and shall maintain level playing field,” said Praveen Khandelwal.

while strongly refuting the statement of both Amazon & Flipkart said that when they are allowed only for B2B business than what is the need of organising festive sales, indulging into big advertisement campaign attracting consumers. B2B sales means sellers registered on their platform will sell their goods only to business entities and not to any consumer whereas in their case the entire business activities are between business to consumers which is a violation of the policy. Since these e commerce companies are not owners of the inventory how can they offer deep discounts on the inventory hold by the sellers registered on their platform. As per policy, it should be the seller offering discounts but in this case the discounts are offered by E commerce companies which is again violation of E commerce policy. Such festive sales offering deep discounts are nothing but influencing the prices directly or indirectly which is a clear violation of the policy.

Khandelwal further said that if these companies are so transparent and law abiding they should declare the names of first 10 sellers on their platform since last 5 years out of 100,000 sellers registered on Flipkart and 500,000 sellers registered on Amazon. It will be found that same set of entities are selling almost 80% of the goods and that too consumers and not business entities. The rest of the sellers are mute spectators and do not find any opportunity of doing business on these platforms which shows that these companies have direct control over the supplies, prices and inventory which is a blatant violation of the policy. It is not the sellers but the e commerce companies which decide the prices. Their offering deep discounts and earning losses are funded by their respective investors to enhance the valuation of the Company. So ultimately it is the valuation game in e commerce and not a platform for selling goods.

also said that traders of the Country are not afraid of any competition and do not oppose E commerce but there should have been an equal level playing field having no malpractices. He said that FDI is made available by Private Equity or Venture Capitalist without any element of interest as the PE or VC are supposed to exit at one point of time when valuation of the Company is high taking huge margin of their investment. On the other hand in UK, USA, Europe and other Countries the funds are available at the interest rate ranging from 1.5% to 3% per annum only whereas in our Country it is from 9% to 14% . This difference of rate of interest is alone sufficient to control the market but over and above these e commerce companies also offers deep discounts which makes the level playing field uneven.


The organisation stated that Amazon and Flipkart are allowed only for B2B business and there is no need for organising festive sales like this. “These companies are indulging into big advertisement campaign to attract consumers. B2B sales means sellers registered on their platform will sell their goods only to business entities and not to any consumer whereas in their case the entire business activities are between business to consumers which is a violation of the policy,” said Praveen Khandelwal.

Amazon, Flipkart sales

CAIT Lock Horns With Ecommerce Companies For Violating FDI Rule 3

The traders body questioned that since these ecommerce companies are not owners of the inventory how can they offer deep discounts on the inventory hold by the sellers registered on their platform. “As per policy, it should be the seller offering discounts but in this case the discounts are offered by ecommerce companies which is again violation of ecommerce policy. Such festive sales offering deep discounts are nothing but influencing the prices directly or indirectly which is a clear violation of the policy,” said Praveen Khandelwal.

The traders body also further said that if these companies are so transparent and law abiding they should declare the names of first 10 sellers on their platform since last 5 years out of 100,000 sellers registered on Flipkart and 500,000 sellers registered on Amazon.

Seller are spectators

“It will be found that same set of entities are selling almost 80% of the goods and that too consumers and not business entities. The rest of the sellers are mute spectators and do not find any opportunity of doing business on these platforms which shows that these companies have direct control over the supplies, prices and inventory which is a blatant violation of the policy. It is not the sellers but the ecommerce companies which decide the prices. Their offering deep discounts and earning losses are funded by their respective investors to enhance the valuation of the company. So ultimately it is the valuation game in ecommerce and not a platform for selling goods, ” said Praveen Khandelwal.

The association said that traders of the country are not afraid of any competition and do not oppose ecommerce but there should have been an equal level playing field having no malpractices.

Fund Dumping by PE/VC

He said that FDI is made available by Private Equity or Venture Capitalist without any element of interest as the PE or VC are supposed to exit at one point of time when valuation of the company is high taking huge margin of their investment.

Praveen Khandelwal pointed that in UK, USA, Europe and other countries the funds are available at the interest rate ranging from 1.5% to 3% per annum only whereas in our country it is from 9% to 14% . “This difference of rate of interest is alone sufficient to control the market but over and above these ecommerce companies also offers deep discounts which makes the level playing field uneven,” said CIAT President.

CIAT President Praveen Khandelwal

He pointed out that when they are allowed only for B2B business then what is the need of organising festive sales, indulging into big advertisement campaign attracting consumers. “B2B sales means sellers registered on their platform will sell their goods only to business entities and not to any consumer whereas in their case the entire business activities are between business to consumers which is a violation of the policy,” said Praveen Khandelwal.

“Since these e commerce companies are not owners of the inventory how can they offer deep discounts on the inventory hold by the sellers registered on their platform. As per policy, it should be the seller offering discounts but in this case the discounts are offered by ecommerce companies which is again violation of ecommerce policy. Such festive sales offering deep discounts are nothing but influencing the prices directly or indirectly which is a clear violation of the policy.” said Praveen Khandelwal.

The CAIT has urged the Union Commerce Minister to immediately look in to the blatant violation of the FDI policy of the Government by these e commerce companies and impose a ban on declared festival sales.

Habitual offenders

he CAIT has also urged the government to institute an investigation in to business model of these companies. It is deeply regretted that if any trader in the Country is found to be violating any law or policy, immediate action is taken against him by the authorities then why action should not be taken against these companies who are habitual offenders of the policy since last so many years. It is for the government to protect the sanctity of its policy and therefore action should be taken against these companies.

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