The Indian government doesn’t want to ban flash sales, but is against predatory pricing and violation of Foreign Direct Investment (FDI) norms by e-commerce platforms, both of which the government will address with the upcoming e-commerce policy, Consumer Affairs Minister Piyush Goyal hinted at the Enabling Bharat 2.0 event held on April 25.
“That was a mistaken understanding. Why should I complain if somebody wants to give a discount? The word flash sales, and I acknowledge it was a mistake of my department, was never intended to be against discount sales or against any of these Diwali dhamakas or any of that. Consumers are getting a good deal, we have no problem.” — Consumer Affairs Minister Piyush Goyal
Goyal’s comments appear to be in relation to the proposed amendments to the e-commerce rules that were announced first in September 2021 and called for a prohibition of flash sales, which were defined as sales “organized by an e-commerce entity at significantly reduced prices, high discounts or any other such promotions or attractive offers for a predetermined period of time on selective goods and services or otherwise with an intent to draw a large number of consumers.”
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Why does this matter: As pointed out by many at the time, the proposed ban on flash sales was too ambiguous, unreasonable, and not in the interest of consumers. The clarification by the Consumer Affairs Minister should offer some relief to platforms, consumers, and sellers, as platforms and sellers can continue to use flash sales like Amazon’s Great Indian Festival and Flipkart’s Big Billion Days to attract customers to shop online, and consumers can benefit from steep discounts.
What the government is against: Goyal explained that the government is going after:
- Predatory pricing: “One is what China did to Indian manufacturing where you do predatory pricing. Keep dumping goods for a long period of time at very low prices, kill domestic manufacturing in India so that ultimately consumers will have no choice and they can charge an arm and a leg afterward,” Goyal remarked. “They [foreign e-commerce platforms] have deep pockets. Trillions of dollars of value. For them investing 1 billion, 2 billion, and 5 billion in India and making huge losses is not a problem. […] It’s just the accretion of consumers at any price, at any cost. Today the consumer may get excited, but in the law, as a policymaker, I have to look at the long-term good for Indian consumers and in that predatory pricing or such methods of innovatively cheating the public of choice is what we are against,” Goyal elaborated.
- Marketplaces violating FDI norms and selling to customers directly: As per India’s Foreign Direct Investment (FDI) policy, foreign e-commerce marketplaces are prohibited from selling directly to customers. They can only sell to other businesses or act as intermediaries connecting third-party sellers, which is what Amazon and Flipkart claim to be doing. But Goyal alleged that some foreign platforms are luring customers with flash sales and making a sale directly rather than enabling third-party sellers to do it.
Effectively, the sale happens through a preferred seller in the marketplace. “That is cheating. And we are only trying to stop that cheating through the e-commerce policy we are coming out with,” Goyal stated. “The FDI laws have to be respected and a marketplace has to operate as a marketplace. Other products [that they want to sell by themselves], they can sell as their own single brand platform, we have no problem. That is perfectly possible and permitted. But you can’t mix the marketplace model with your single brand retail model,” Goyal added.
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- Proposed Amendments To The E-Commerce Rules – The Good, The Bad, And The Ugly
