E Commerce Companies offering deep discounts is violation of FDI Policy: CAIT

E Commerce Companies offering deep discounts is violation of FDI Policy: CAIT

Confederation of All India Traders (CAIT) gives representation to Piyush Goyal, Hon’ble Minister for Commerce & Industry.


The representation says, We invoke your kind and immediate attention to festival sales declarations by various E Commerce Companies where such Companies are offering deep discounts which runs against the mandate of Press Note No.2 of FDI Policy,2016 later amended in 2018. In this context, we attach herewith a detailed representation along with substantial evidence of these portals indulging into predatory pricing and deep discounting with a request that since they are openly flouting FDI norms, a blanket ban on such festival sales should be ordered and an investigation should be conducted as to how these Companies are flouting FDI norms and accordingly action should be taken against them.


In support of our contention, we rely upon the following :


a. As per FDI Policy, Marketplace based model of e-commerce means providing of an information technology platform by an e-commerce entity on a digital & electronic network to act as a facilitator between buyer and seller.It is further provided in the policy that Marketplace e-commerce entity will be permitted to enter into transactions with sellers registered on its platform on 828 basis.


However, much contrary to the FDI Policy, the e commerce portals are deeply engaged in B2C Business and the quantum of B2B Business is almost negligible.


b. The policy states that E-commerce entity providing a marketplace will not exercise ownership or control over the inventory i.e. goods purported to be sold. Such an ownership or control over the inventory will render the business into inventory based model.


The pertinent question is that the Sales can be organised only by the owners of inventory and since these companies are not the owners of inventory how can they offer discounts on the products owned by sellers registered on their platform which establish the fact that these Companies hold control over the inventory which is against the FDI Policy.


c. As per FDI policy, E-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain level playing field.


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.


Under the circumstances and representation attached herewith, we request you to please immediately look in to the matter and stop these Companies for organising any festival sales or other sales having an element of predatory pricing or deep discounting.