New Delhi: A Rs 2,199 watch available for Rs 247. An air purifier worth Rs 32,995 for Rs 23,999. Branded shoes at 60-80 per cent off, and an inverter worth Rs 9,995 at Rs 4,499. The Diwali sales offered by e-commerce giants Amazon and Flipkart draw thousands of breathless customers looking to score sweet deals on a whole range of essentials as well as indulgences.
The same deals have now brought the companies under the government’s scanner over alleged “predatory pricing”, a controversial business practice where a player offers massive discounts to mitigate competition.
Last week, Union Commerce Minister Piyush Goyal assured action against Amazon and Flipkart if the two companies are found guilty of the practice. The two companies have reportedly notched up sales of over $3 billion in their festive sales this month.
According to reports, the government has sent detailed questionnaires to both e-commerce platforms, which are owned by Americans.
“E-commerce companies have no right to offer discounts or adopt predatory prices. Selling products cheaper and resulting the retail sector to incur losses is not allowed,” Goyal was quoted as saying.
While the government awaits their response, ThePrint explains the laws the websites may have flouted with the discounts.
Also Read: Fashion, lifestyle and electronic items expected to vanish from Amazon & Flipkart
What is predatory pricing?
While Amazon is a US-based company, Flipkart, founded by Indians, is majority-owned by American giant Walmart.
Both follow the marketplace model of e-commerce, which means they connect sellers and buyers instead of selling their own wares. This is the only type of e-commerce where foreign investment is allowed in India.
Under FDI rules that kicked in this February, they are also barred from striking contracts with private companies for exclusive sales of certain items, for example, the OnePlus-Amazon partnership, and offering discounts.
Even so, Flipkart and Amazon, apart from other e-commerce portals, have often been accused of indulging in predatory pricing owing to the deep discounts they offer.
Before the new FDI rules took effect, these platforms were accused of buying products in bulk from manufacturers at heavy discounts, and then selling them at lower costs to entities where they had a stake. These entities would then reportedly sell these products on the e-commerce platforms at lower costs.
Costs were allegedly brought down further by waiving the delivery fee and via cashbacks, often on their own payment portals like Amazon Pay.
Since such practices are seen as inimical to the functioning of brick-and-mortar stores, the new FDI guidelines barred e-commerce entities from “directly or indirectly” influencing the price of goods and services.
It also tasked the companies with ensuring a “level-playing field”. In order to emphasise this, it stated that cashback or other services such as quick delivery should be applicable to all vendors on these platforms.
The policy required e-commerce platforms to realign their business structures to ensure compliance. A draft analysis by PwC, in fact, predicted that the revised policy could cause a $46 billion fall in online sales by 2022.
However, experts have been of the opinion that price-influencing is a competition issue rather than an FDI issue.
“FDI is the wrong place to regulate marketplace or anti-competitive behaviour,” Nikhil Narendran, a partner at India-based law firm Trilegal was quoted as saying. “Deep discounts by itself are not bad as long as they are not harmful for the consumer. Free market, competition, and innovation benefit the consumer.”
What about the Competition Commission of India?
Before the new FDI policy took effect, the Competition Commission of India (CCI) — the watchdog for anti-competitive practices in India — had absolved e-commerce platforms of indulging in anti-competitive practices.
For instance, in Ashish Ahuja v Snapdeal.com, the CCI noted that the e-commerce market “thrives on special discounts and deals”.
It had then ruled that while Section 4 of the Competition Act 2002 does prohibit predatory pricing, the discounts offered would not be illegal since Snapdeal was not a “dominant player” in the relevant market.
A market player is said to enjoy a dominant position when it can function independent of its competitors, customers and others, to take unilateral decisions.
However, with the growing concern over predatory pricing, the CCI is planning to issue a “soft policy advisory” for the e-commerce industry.
The commission has also initiated a study on e-commerce to gather information and insights from market participants in goods and services for various sectors like mobile phones, grocery, food, electronic/electrical appliances, lifestyle and hotels.
CCI chairperson Ashok Kumar Gupta told The Economic Times last month that deep discounts make a business “unviable” as it reduces the value of products and services in the eyes of the consumer.
Following written complaints by the brick-and-mortar retailers lobby, the Confederation of All India Traders (CAIT), the CCI also told Goyal that it will keep a close watch on these deep discounts.
Draft e-commerce policy
The Department for Promotion of Industry and Internal Trade also released a draft e-commerce policy in February, but this focused on setting up a legal and technological framework for restrictions on cross-border data flow.
The policy did propose prohibiting e-commerce marketplaces from adopting business strategies that favour one or few sellers/traders, and a more comprehensive version is expected in 2020. However, the government has clarified that there will be no changes in the FDI rules in the sector.
In August this year, the Ministry of Consumer Affairs, Food & Public Distribution released ‘E-Commerce Guidelines for Consumer Protection 2019’ to protect the rights of online customers. These guidelines make it the e-commerce platform’s responsibility to maintain a “level playing field” and to ensure that it does not “influence the price of the goods or services”.
Meanwhile, the US government has reportedly voiced its concerns over the new FDI rules for e-commerce, and pushed for the regulation to become a bilateral issue.
Also Read: RSS affiliate, trade body want govt to act against Amazon & Flipkart, fear ‘black Diwali’
Everyone knows how the businesses fix prices, go to any wholesale market. it is dominated by a particular community and they give out clear instructions to not sell a particular commodity at a price lesser than they suggest. Why is the govt sleeping on that? Th e commerce companies are thriving and able to give the discounts only because they are not controlled by that community.
Does predatory pricing concept not appapplicable to Jio? Why should the government intervene when customer is getting product at lower prices? Are Amazon and flipkart not making profits despite charging such low prices? Then just imagine what is the profit margin when goods are sold at MRP?
Did we elect this government to allow businessmen suck the blood of common man to build empires?
Actually government should enquire why business houses are charging so high a price compared to the manufacturing cost.
We expect our ministers to use their brains
Modi government helping reliance to start their business in e-commerce….
If predatory pricing is really bad and against the rules ..the what stopped the govt from questioning jio. Wasn’t that a clear case of predatory pricing. ??
Public ka jeena haram karke rakha hai iss govt ne. Iss mahngai ke time kuch relief milta hai kahin se to iss govt ko bardast nahi ho raha hai. Boycott this type policy govt.
Exactly
Finding all ways and means to take money from general public and feed the sick PSUs and banks.
Not a single tax money is invested in any development work. The development stands still. Tax goes to feed the PSU and PSU banks. Every year this govt feeds more than 100000 crore to these PSU in staff salary revival. Good planning. They must be thinking to increase the tax rate to give them the hiked salary. We are heading to a big zero.
I hope there is some deal with reliance to push off these e-commerce companies, so that reliance can take over.
What should be more important for the govt; the interest of a retail purchaser or the local business tycoons ?…. .. If this govt has been accused of being ,” a suit boot ki sarkar”, it doesn’t need to be questioned.. Actually the problem with this govt is it lacks vision. And is yet to understand the demands of emerging globalization..
Has the government or the concerned Ministry ever looked at overpricing.
Eg. In Mumbai you purchase from Dmart the prices are very much lower than MRP , agreed due to bulk large quantity purchases they get discount.
But government has to check how the MRP is determined other retailers sell on MRP but the big margin n difference clearly shows the big difference.
Therefore first an MRP must be correct n reasonable not fleecing the end users.
Agreed go behind the behemoths, but dont spare the retailers they are in numbers – together the government can fine them n that collection will exceed what they plan to get out of Amazon or Flipkart.
Government must check why the big difference n why are others overpriced.
Govt is right in its place but y the hell same govt shuts mouth when Mota bhai plays around….. Hypocritic bas…..
What about irregular practices in telecom sector? Government allowed Reliance to dominate local market and even ignoring government owned company BSNL, which led to to bad condition of Idea and BSNL by losing customer base.
I believe Indian government now should apply fair business practices in all sectors in india in the same way US has done.
This is nothing but hypocracy on the part of govt. Back then JIO was allowed to carry out predatory pricing leading to many operators to shut down their shutter rendering tens of thousands of people jobless causing hardships to their livelihood. What did the govt do then? Were they sleeping? Does it not arouse some suspicion on the mind of many? Why Not punish JIO also? Seems like govt has some favourite. Guess who?.. let readers be the best judge.
Don’t you think that Consumers are poor than local retailers. Why government are against consumer in getting products @ reasonable rates? Competition are to promote reasonable pricing so all sellers should giver discounts to customer and poor consumer can afford products due to discount. As due to high pricing consumer loose their hard earned money.
Rather than restricting discounted pricing government should encourage local sellers to sell products at e-commerce website. So all parties are benefited.
Good i support ur comment. Government should be happy to doscounting price on e commerce that can be taken every poor indian. No action should be taken against e commerce.
Government has to introduce a new policy for selling a product with minimum and maximum price at which manufacture want to sale should be printed on the product itself, customer will be able to know at what minimum price the product they can buy, and at the same time customer will be able to know at what maximum price they can avail that product. At the same time the government should monitor the quality product.
What crap article? When has government made these statements?
Why should government control private pricing unless its in life saving category?
When shops loots customer its ok?
In this global slowdown Amazon and Flipkart are infact helping consumers to buy things at reasonable prices. These steps should be initiated by e-commerce companies based in India. That clearly shows that the Indian manufacturers, wholesalers, retailers can easily get these prices within the same range. But the government instead of focusing on the real issues are diverting it. This way it will honestly be difficult for an genuine tax payer to survive. Policies should be in favour of Common Man. The ways government is seeing things is not Democracy. It is purely hypocracy. I strongly oppose to such decisions.
If Flipkart and Amazon are indulging in predatory pricing, what about Jio, which has turned the mobile business into bankrupcy. It shows, the present govt is having an unholy relationship with reliance. What is CCI doing.
This only supports the theory government of India is run by Reliance Industries.
Relaince is making its way into e commerce and now relaince are making rules which government has to implement. The Govt motto seems to mandate every Indian to use only relaince platform so that when the free period is over there will be no competition. Can someone please file a PIl again the supreme court judges are also pro reliance if the verdict goes against then the judge will get transferred or forced to resign.
The proof of predatory pricing depends on analysis of cost structure. The manufacturer can not waste this country’s resources. The ministry of commerce must assess the cost elements and find out the real reasons of low price. No manufacturer can sell its products at discount financing from own resources. To call a spade a spade no traders are allowed to waste the country’s resources. I think modi govt. should not allow to incur losses where by resources of this country is wasted.
So, ThePrint want us again to consider Modi government is not in well fare of India peoples and it keep doing as if they choose to feed upon Modi as their business monopoly through running campaign called Anti Modi. If the government wants to punish Amazon and Flipkart in order to maintain the law. Why you’re so pitifying on e commerce company just because Modi government choose to doing this so?
E com is completely misunderstood , it benefits seller, buyer,manufacturers. it employs delivery executives, call centre employees,transport employees, packaging executives, helps small businesses to grow inspite of inflation. People must learn to adapt to this as it is going to be a way of life!!
Just because reliance wants to start an e commerce company now Amazon and flipkart became predatory it’s just like maggi and jio try to destroy the competion by one way other and take over and entire industry …. If product is available at the price why can’t the costmer have it many people are employed and many people are selling products on amazon opportunity have been created also not to mention direct marketing is also started on social media destroy them to … Corporate culture dosenot allow you to have time to shop a lot of things …. Buy from relianse or don’t have the product at all . I anyone have doubts about this they tried to ban cod on online forums 6 months back with the intention of company to start an e commerce firm
It is better to impose additional 10% tax for all online shopping. It is a fashion now. 100% digital is not required for a country with 130 billion population. It will create job losses.
Where is CCI when it comes to Zomato and Swiggy? Those huge discounts and commissions are destroying the restaurant industry! Common public is being fooled and food quality standards are lowered to survive in the competition.
We are happy with the services of Amazon anf Flipkart, Uber, ola. They offer competitive price. Govt should be happy that people are happy with their services. In fact people are not happy with govt services like SSC, Univ and judiciary and PSUs who are under suspicion. Govt and judiciary are same. No laws are being implemented. If govt wants, it gets implemented immediately whether it is constitutional or not.
Foolishness on the part of other competing sellers. If Amazon can sell, they should also sell. They want huge margins for maintaining brick and mortar shops and want the customers to subsidized their expenses through high prices. Surprisingly, GOI is supporting them where as it should opposite. I support Amazon and Flipkart.
A great though, by government just I can say
Ha Ha Ha ,
After the losses in Diwali finally government wake up.
It’s politics, well played
Modi just travels for 6 months without bringing any business to India after getting elected. He screwed up the roads of Mumbai. Where was he when hundreds and thousands were stuck on an outstation train this year due to incessant rains.
Whenever he wants he issues notebandi.
I openly challenge him to come to me and have a chat not in any air conditioned room but on the road without his freaking bodyguards.
He doesn’t have the guts…
In Modi’s Raj the economy has gone down. It was at an all time high when Manmohan Singh was in the office.
I an not so proud to be an INDIAN after seeing such state of affairs.
Finally A BIG THANK YOU to all the intellectual illeterates to vote Modi into power….
Not only does the government tax to death but also imposes protectionist barriers, to buying cheaper goods, on consumers. Now it also wants consumers to pay more for goods that sellers are ready to sell for a lower price. All in all government wants to ensure that tax payers are left with no savings. Wonder who the government is working for.
When e commerce is on higher sale offline sellers becoming more complicated to sell the products e commerce is providing highest discounts that even a Manufacture can’t offer. Due to this higher discounts customer getting benefit but becoming lazy that even without looking product physically customer is buying online
What about Jio and their ‘predatory pricing’? They’ve ruined India for telecommunications. No one bats an eye for that
Although deep discount is gud for customer but always remember if I am a customer today then on other day I am also a seller for goods or services..our mentality is that we want every thing with highest discounts when we are customer and wish to sell our product with highest price when they are seller.
These companies say that you can reach anywhere in india to sell your product via our portal….
भैया मैं दिल्ली से माल गुजरात भेजूंगा वो भी commission देकर, और गुजरात के भाव से सस्ता तो गुजरात का व्यापारी कहाँ जाएगा????
कंपीटिशन अच्छा तभी होता है जब कंपीटिशन लगभग बराबर ताकत वालों के बीच हो।
Sometimes it seems modi is ambani’s or adani’s Pa more than the pm of our nation. Worst gov ever , all are merely10 passed
Why this was not applicable to Reliance Jio when it launch free services and competed the telecom companies and made small companies to close the business and became many people jobless…
Where was such concern when Reliance Jio was freely permitted to damage the competition by using irrational predatory pricing and freebies?
This is only because reliance want to enter retail business and want to dominate market, just like they have done in telecom sector. They know amazon is much stronger than companies in telecom. So Govt. is just trying to ake it easy for them.
Online store selling fake products. First it should be addressed
BSNL and MTNL committed harakiri through their poor service quality long before Jio came into picture. Nobody was required to kill those PSUs they killed themselves after harassing the public for decades.
If Predatory pricing is allowed, offcourse it benefits customers and the customer always feel that other manufacturers are charging more.Just because, the e- commerce platform gets heavy discounts, they should maintain the price gap.There is no bar on this, even if Law is made.so why no notice is issued for selling at Predatory price.The rich is becoming richer and richer, and the other manufacturers are crying.These e commerce platforms should be barred from doing business in india.
Even though I had bad experiences with Amazon of getting products without any catalogs wrt to use Homeshop18 not getting the order placed. Why blame online platforms for giving customers discounted price by forgoing higher profit margins despite charging GST. Also all products are not available in neighbourhood shops. Even if it’s there the full MRP is charged. Customers have no choice of selecting products
When cold drinks are sold above the MRP, finance ministry chills, but when customers are benefited from low prices, finance ministry gets on red alert. If this is not hypocrisy, what is ?
Funding to political parties from any source is allowed and there is no need to disclose the source, But a common citizen of this country must pay higher price for an object to prove his patriotism. Waaaah !!
Ridiculous.You cannot be talking global and acting local.Government has no business to rob the customers from getting better deals.And you have no business to stop somebody from managing their business wisely.Who is stopping local manufacturers from cornering the market by offering discounts to brick and mortar stores/ customers directly what they would have offered e commerce otherwise?
They will Rob everyone earning and doing business …. Want everyone to eat and sale Pakodas
I wonder what the government was doing when Jio was “predatory pricing” the telecom market that has made Jio a near monopoly company. And ended the livelihood of thousands in the tele om sector.
Telecom sector can’t be compared to e-commerce
It’s like comparing condoms and vegetables.
What JIO has done is well within law and the competition act doesn’t arise there.
The others in the Telecom sector were charging us 251 Indian rupees for 1gb of data.
If you remember.
And jio came and showed how much it actually costs and how much should be charged to the customers.
Be thankful to jio. It has literally made lives of the whole country easier and affordable, irrespective of the network they are in. The Telecom industries even started to respect and value us to retain us. They were brought to their bloody knees after looting the people nicely.
Anyway that aside..
E-commerce is a new area comparatively, in India.
The laws set currently are in the interests of the citizens of the country and not just the consumers who are temporarily for receiving few hundreds as discount on one or two purchases.
But in actuality millions of shops are getting affected because of the foreign body in the country and it’s not Justice if their interests are taken too.
The govt, though horrible at times, does come up with good stuff for the people.
The law has to be abided whosoever it may be and whatsoever it may do.
It’s good to have competition, it is in benefit of customer. But if you look on a long run, what these billionaire compaines of e-commerce doing is they are giving there own money as casback or discounts to customers.,which is indirectly hampering the local market. Imagine a day when you have only billionaire companies selling everything and no local market, then you have to buy on whatever price they will offer. Its a changing policy of Amazon or Flipkart, as you can see when they started they used to give direct discounts, now changed to cashbacks or bank discounts, now they are charging you for getting more discounts, for eg: prime for free delivery. Even they started there own portal for payments.
On the part of government, it’s there duty to look after the local market or per say the retailers. They should not be taken out of the market because they are not billionaire or they cannot spare money for discounts
Predators pricing is like putting your money for discounts to cut the competition, which should be condemned.
Well said. The government if it wants to support small traders to enter e-commerce should create and maintain a portal through which the former can sell at whatever price they want. A small fee can be charged for maintaining the portal. Curbing free pricing is against consumers’ interest and undemocratic. The govt just wants to create a vote bank of retail traders for its own interests. No wonder BJP is called a ‘Bhania’ party!
what happened to this goverment when Jio was giving mobile conncetions for free, wasnt that predatory pricing
Telecom sector can’t be compared to e-commerce
It’s like comparing condoms and vegetables.
What JIO has done is well within law and the competition act doesn’t arise there.
The others in the Telecom sector were charging us 251 Indian rupees for 1gb of data.
If you remember.
And jio came and showed how much it actually costs and how much should be charged to the customers.
Be thankful to jio. It has literally made lives of the whole country easier and affordable, irrespective of the network they are in. The Telecom industries even started to respect and value us to retain us. They were brought to their bloody knees after looting the people nicely.
Anyway that aside..
E-commerce is a new area comparatively, in India.
The laws set currently are in the interests of the citizens of the country and not just the consumers who are temporarily for receiving few hundreds as discount on one or two purchases.
But in actuality millions of shops are getting affected because of the foreign body in the country and it’s not Justice if their interests are taken too.
The govt, though horrible at times, does come up with good stuff for the people.
The law has to be abided whosoever it may be and whatsoever it may do.
Sir
Jio is not moderator, it provided services and offered discounts from own pocket…….While these companies are moderators…They put pressure on seller after they acquire a certain number of seller in that category by saying
तू नही तो कोई और सही।
Believe me….It is my personal experience as seller
Socialist Modi murdabad. Amazon Flipkart zindabad.
I think we should be happy that government is taking some step to avoid Monopoly situation by 2-3 ecommerce who are trying to capture entire Indian customer base. Today 80% of ecommerce business is Mobile n Elctronic products which directly they controlled through owned companies which is clear violation of FDI norms.
Today brick-n-motor (BnM) shop create huge employment in our country and it helps every Family at Local level which is associated with those BnM. (Minimum/Appox 4 Families get their bread-n butter by One BnM shop and reduce the concern of Unemployment). If they charging some extra it will help to balance local economy.
Am not against ecommerce but they should not try to create a situation where they will control Brands and Consumers both which would be the disaster for country. Think form a long term perspective to balance the economy.
Dear sir,
Can you please explain why Modi ji is silent when Because of jio BSNL ruined away. Now also due to Amazon and Flipkart poor people is benefitted. But this govt is anti poor. They want to eradicate poor from India. This move is to protect big business man who are suffering due to Amazon sales.
This Govt is hypocrite. Firstly there demonetization policy kills small businessman. I don’t see any rich standing in queue and dying in the queue. Rich black money become white due to conversion. Poor small carpenter and other small business man dies. Then GST. In phulwama soldiers dies and government taking mileage. In Indian history first time government is glorified when soldiers died. How RDX reach there in that sensitive area no body. Knows. Ambani publicise jio Govt sleep. Now when Amazon and Flipkart offering relief then because businessman is suffering govt takes action. Mr Modi better you kill the poor. But no no poor are vote.bank.
Earlier days no one wanted to buy things above MRP.
Now, no one wants to buy at MRP. So we love online shopping. If they want to discount items, customers never say “Don’t”.. We just buy them.
When general middle class or lower class people gets goods at lower price, why this govt. Unhappy.
Is govt. Working for people or for
Business people.
Govt is trying to balance the situation where no company can dictate the entire consumer base of country.
why was jio not fined for giving free sim and connection as well as free mobile services which were predatory to other mobile network service providors, including goverment owned companies
flipkart and amazon are at least not threat to goverment owned companies
Can you please comment when public sector BSNL is dying and Govt is promoting Jio. Amazon and Flipkart are giving relief to poor one. But Modi hi is worried about big business man.
What about the jio ?? Was it to balance the market or to give monopoly ??
Flipkart and Amazon should give stakes to the two big A’s close to them and than they will have no problem.
How can common man save money. These ppl can’t digest it.
Common man ka sab paisa in logon ke jeb mein jaana chahiye
Mental state of present government can well be explained by a Hindi proverb: “दही खाएं की मही की दोनों”. It is short-sighted and confused which can be noticed from it’s decision regarding Demonetisation, GST, Budgetary tax proposals & then blackout. Obstinate and falsifying.
They are not concern of ratail, their only worry is low GST due to low price…and if the revenue is low, corruption kaise karenge…this is black turth
I think you should understand the GST first then only comment like this.. GST gets paid at the time of first transaction when brands sells through ecommerce or Brick n Motor..
The brick-motar store sells the product of cheap quality and without MRP listed on them. The local manufacturers put the high prices for their cheap quality products and wants us to buy. And profit margins are too high so retailers also sell these cheap products. And the e-commerce platform is actually giving discounts on products which are outdated or out of trend or also to clear the tag. For example the 3g mobile handset is no more trend so they call for these festive sales and clear those stocks.
Finally : As a consumer i would like to get value for my hard earned money so if someone is giving it free for me, I have no problem with it.
There are plenty of cases where ppl gets cheap or counterfeit products through ecommerce also. We should only appreciate the convenient buying through ecommerce nothing else. I usually buy toys for my son through ecommerce and usually they stick more MRP than what was written on box. So it’s not you always gets good/fair deal.
We should understand that they are also doing business and they are here for only one Motive I.e. Profit and Profit only.
What a hypocrite govt this is? When jio launched free services to ruin BSNL and MTNL there was no hue and cry over that. Wasn’t free calls predatory pricing???? Government must answer this first.
In a electoral democracy you need to look after the people who pays for your election expenses.
Already averse to FDI and free market, this government is unnecessarily trying to micro-manage trade and commerce. In fact the government should encourage more such players to enter the field and transform the structure to oligopoly. Having done that, it should just focus on tax compliance, keeping a watch on collusion, consumer rights and corporate governance. How competition should play out should be left to the market to decide.
e-commerce is complete white business, totally transparent. No cash transactions like brick and mortar store. Shouldn’t Govt be happy that they receiving good revenue or should they be worried about vote banks, the trader community? Govt should enforce all transactions only through card at these trader stores. Cash transactions should be banned. Only then these traders will pay GST in full and not evade tax.