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Offline vs Online: Retailers seeks action against Flipkart and Amazon for violating FDI rules

On behalf of a group of offline retailers in India, The Retailers Association of India (RAI) Retailers Association of India (RAI) has sent a letter to Ministry of Commerce & Industry seeking action against e-commerce players Flipkart and Amazon for apparently violating Foreign Direct Investment (FDI) rules in India by “influencing prices and illegally funding abnormal discounts” on their platforms, reports The Economic Times. The publication said that it viewed a copy of the same letter.

While MediaNama’s e-mails went unanswered by RAI, and Amazon on the same. Flipkart’s spokesperson said that “Flipkart.com is an online marketplace that helps sellers connect with their customers across the country. We conduct our business with highest standards if integrity and in compliance with applicable laws. All sales, including sales of private label products, on the platform are undertaken by sellers who are listed on the platform.”

RAI’s members include retailers such as Aditya Birla Retail Ltd, Future Group, Reliance Retail, Fab India, mobile handset manufacturers, apparel vendors etc. In its letter, RAI reportedly said that these marketplaces are operating against the spirit of the policy and that “there is an ambiguity around these guidelines which can be worked around by marketplace operators to overcome the restrictions defined in the B2C e-commerce policy. This means that they can continue to operate against the spirit of the policy with no checks and balances.”

In its letter RAI referred to Pressnote 3 of FDI rules, which says that E-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain a level playing field”.  Also, in March 2016,  the Indian government’s Department of Industrial Policy and Promotion, disallowed FDI in B2C e-commerce in India, while FDI in marketplaces was allowed to continue.

RAI’s previous call-out

Last year in October, RAI had sought help from the Prime Minister’s Office (PMO) on the unfair practices of e-commerce players in India, and complained that the e-tailers are not adhering to the government guidelines. The government setup rules for e-commerce players, under which e-tailers must not have more than 25% of their overall sales from one vendor, and RAI had said that the e-tailers haven’t practiced it and rather established new sellers to comply with the rules.

Update: We updated the copy with Flipkart’s statement on the matter

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