Friday, September 25, 2020
Home Government and Policy All you need to know about how Amazon and Flipkart are abusing the market...

All you need to know about how Amazon and Flipkart are abusing the market rules and how Govt is plugging loopholes

India’s antitrust chief Ashok Kumar Gupta told Reuters on Tuesday that big e-commerce companies in India should not offer deep discounts which can potentially hurt and small-scale brick and mortar retailers in India.

Jeff Bezos, the founder of Amazon Inc and the owner of Washington Post visited India for a tour even as several small traders are planning to stage protests against the retail giant for distorting the local market. India’s antitrust chief Ashok Kumar Gupta told Reuters on Tuesday that big e-commerce companies in India should not offer deep discounts which can potentially hurt and small-scale brick and mortar retailers in India.

Amidst the ruckus, Union Minister Piyush Goyal had decided not to meet the WaPo owner Jeff Bezos during his three-day India visit. Following that, Prime Minister Modi too did not meet Jeff Bezos personally. Under such circumstances, the government has issued a detailed clarification of its views over the matter.

What are the main issues with Amazon and Flipkart operations in India?

As pointed out in the recent Competition Commission of India (CCI) order of Jan 13, 2020, the four main concerns regarding Amazon and Flipkart operations in India are deep discounting, preferred sellers on the marketplaces, preferential listing/promotion of private labels and exclusive launch of mobile phones.

Let us take these issues one by one. How do Amazon and Flipkart engage in deep discounting and how is it anti-competitive?

Both Flipkart and Amazon continue to make losses. Flipkart India Pvt Ltd had a turnover of Rs. 30,931 Cr and loss of Rs 3,835 Cr in the fiscal year ended 2019. This shows Flipkart is burning cash through deep discounts. It is subsidizing prices for their multiple seller entities. At Amazon, seller services losses are to the tune of 5,685 Cr. It is observed that there is deep discounting and it is used for subsidizing vendors.

- Advertisement -

Also, as mentioned in the CCI order, communications sent by Flipkart and Amazon to their sellers reveal that they are incurring a part of the discounts offered during the big sale events like the Big Billion Days (BBD) of Flipkart and the Great Indian Festival of Amazon. Certain smartphone brands/models are available at significantly discounted prices on these platforms and are sold largely through the sellers identified, as the platforms’ ‘preferred sellers’. This hurts competition in a negative way as retailers in phone business are not able to compete with the heavy discounts offered by these marketplaces due to their access to global funds.

What does ‘Preferred sellers on the marketplace’ mean and how does it hurt competition?

Both Amazon and Flipkart have their own set of preferred sellers and these preferred sellers have nexus with the e-commerce platforms either by way of direct or indirect ownership or some understanding. It can be seen that there appears to be an exclusive partnership between smartphone manufacturers and e-commerce platforms for the exclusive launch of smartphone brands. This means that certain sellers are given benefits which may restrict actual competition on the platform. This hurts competition as it does not allow other sellers to be listed similarly.

Is there a Preferential listing/promotion of private labels on Flipkart and Amazon?

Flipkart lends the word “Assured Seller” to the products sold by its preferred sellers such as Vision Star, Flashstar Commerce and Flashtech Retail and allegedly creates a bias in favour of preferred sellers to the detriment of other sellers. Amazon lends the word “Fulfilled” to the products sold by preferred sellers and further allegedly creates search bias by listing its preferred sellers in the first few pages of the search results. The products sold by Cloudtail India and Appario Retail allegedly dominate the first few pages of search results. This clearly indicates that there is a Preferential listing/promotion of private labels on Flipkart and Amazon.

What does the Exclusive launch of mobile phones mean and how does it impact Indian businesses?

Mobile manufacturing companies like One Plus, OPPO, and Samsung have exclusively launched several of their models on Amazon. Similarly, Vivo, Realme, Xiaomi etc., have exclusively launched several of their models on Flipkart. In 2018, Flipkart launched 67 mobile phones and Amazon launched 45 mobile phones exclusively on its platform. This has the potential to negatively impact small retail shops selling mobile phones.

How is the Government Plugging the loopholes and are the practices in violation of Indian Law?

These seem to be prima facie a matter of violation of competition law and therefore the Director-General of Competition Commission of India has ordered an investigation into the same in its order of Jan 13, 2020. Also, the Ministry of Commerce and Industry is looking at the FDI aspect of the matter.

The FDI Policy is clear on the matter and from 2000 has stated that FDI up to 100% is permitted for e-commerce activities but such companies would engage only in business to business (B2B) e-commerce and not in retail trading. In fact in 2019 January, too, the Government had issued a clarification on its press note 2 of 2018, which clarified that B2C e-commerce, which is multi-brand retail through the inventory-based model, has all along remained prohibited for FDI. Along with this, the Government is engaged in taking to these marketplaces to ensure proper compliance with Indian law in both letter and spirit.

  Support Us  

Whether NDTV or 'The Wire', they never have to worry about funds. In name of saving democracy, they get money from various sources. We need your support to fight them. Please contribute whatever you can afford

Nupur J Sharma
Editor, OpIndia.com since October 2017

Related Articles

Trending now

Why the mainstreaming of Umar Khalid is scary and the need to restore sanity by drawing a line in the sand

At the moment, with a range of “eminent” personalities coming out in favour of Umar Khalid, he is winning this circuit hands down.

‘He pushed me on the sofa and forced himself on me’, says actress who accused Anurag Kashyap of rape: Here is what she told...

After an initial delay, police registered an FIR against Anurag Kashyap and initiated an inquiry into the sexual assault case

Delhi Riots: WhatsApp chats acquired by OpIndia show how some anti-CAA protestors were aware that violence was planned, discussed ‘de-escalation’

The WhatsApp chats accesses by OpIndia show that some individuals were aware that some anti-CAA groups had fanned the violence and they now need to de-escalate.

Illegal Christian Cross and Jesus statue removed from government land following High Court order in Karnataka: Details

District administration removed a Christian Cross and a statue of Jesus Christ, which was illegally put up, on Susai Paliya Hill in Chikkaballapur in Karnataka.

India Today editors’ tussle with Republic TV is ruining their own credibility, one tweet at a time: Read how

Rahul Kanwal and Rajdeep's sly, targeted tweets against Republic TV are only helping to take their own credibilities further down, and exposing their own hypocrisy.

Separated from her family, kidnapped, converted to Islam and sold for an Ox: Story of Daphia who finally found her family in India

An old woman in Pakistan who was separated from her family during the partition, was abducted and converted to Islam, has finally united with her family in India over a phone call.

Recently Popular

KWAN representative told me that I need to attend Karan Johar Parties to make a comeback to movies: Suchitra Krishnamoorthi

One of the main things is that you need to be seen at Karan Johar's parties, KWAN representative had told Suchitra Krishnamoorthi

India Today editors’ tussle with Republic TV is ruining their own credibility, one tweet at a time: Read how

Rahul Kanwal and Rajdeep's sly, targeted tweets against Republic TV are only helping to take their own credibilities further down, and exposing their own hypocrisy.

Chief of Chief Minister’s Medical Assistance Cell in Maharashtra breaks down while describing the coronavirus situation in the state

In the video, the chief of medical assistant cell in Maharashtra says that he has lost all hopes and that court is the only ray of hope now

Ranveer Singh asks Narcotics Bureau to allow him to accompany Deepika Padukone during interrogation due to her ‘anxiety issues’

Bollywood actor Ranveer Singh, the husband of Deepika Padukone, has asked NCB whether he can be present during his wife’s interrogation

Parliament sees its most productive session: Here is a summary of all the 25 Bills passed by the Modi government in Lok Sabha

A total of 25 bills were passed during the just concluded monsoon session of the parliament some of which are very significant bills

Fact Check: No, Sunil Gavaskar didn’t make sexist comment against Virat Kohli’s wife Anushka Sharma during an IPL game

Sunil Gavaskar was referring to a video of Virat Kohli & Anushka Sharma playing cricket,, didn't make any sexist comment

‘COVID bail’ extension provisions granted by HC being misused: Court rejects bail pleas of Ratan Lal murder accused

Head Constable Ratan Lal was lynched to death by a violent Islamist mob on February 24 during the Delhi Riots.

Jailed SP leader Azam Khan’s son Abdullah Azam to be barred from contesting elections for submitting forged birth certificate in 2017 elections

Abdullah Azam is currently logded in Sitapur jail along with his father Azam Khand and mother Tazima Fathima in a case of fraud.

France: Four injured in knife attack near former offices of Charlie Hebdo, suspicious package detected

Four people have been injured in a knife attack near the former offices of the French satirical magazine Charlie Hebdo.

UP CM Yogi Adityanath announces development of magnificent riverfront along the Ganga in Kanpur, dedicates it to PM Modi

UP CM Yogi Adityanath said that riverfront along Ganga in Kanpur will be gift to PM Narendra Modi, who had praised clean water of Ganga

Why the mainstreaming of Umar Khalid is scary and the need to restore sanity by drawing a line in the sand

At the moment, with a range of “eminent” personalities coming out in favour of Umar Khalid, he is winning this circuit hands down.

“People are deeply hurt”: Congress-ruled Rajasthan press for coercive action against journalist Amish Devgan in alleged defamation of Moinuddin Chisti

Amish Devgan had inadvertently referred to Sufi Saint Moinuddin Chisti as "lootera" while commenting on Muslim ruler Alauddin Khilji

Transparency for thee but not for me: Here’s why foreign funded NGOs hate the FCRA amendment bill

The proposed amendment has restricted the administrative expenditure of the NGOs to 20% of the total foreign contribution.

‘He pushed me on the sofa and forced himself on me’, says actress who accused Anurag Kashyap of rape: Here is what she told...

After an initial delay, police registered an FIR against Anurag Kashyap and initiated an inquiry into the sexual assault case

Deepika Padukone was the admin of the drug chats WhatsApp group, says Times Now report

Deepika Padukone kas been summoned by the NCB for interrogation on Saturday.

Delhi Riots: Defenders of Umar Khalid reach the third stage of grief, they are now ‘bargaining’ with Police for action against Kapil Mishra and...

The defenders of Umar Khalid appear to have reached the third stage of grief after ranting and raving against their arrest.

Connect with us

244,181FansLike
455,537FollowersFollow
16,900SubscribersSubscribe