‘Amazon and Flipkart are destroying India’s retail sector’, says CAIT, urges government to revise FDI policy in e-commerce

The Confederation of All Indian Traders (CAIT) in a letter sent to Union Commerce Minister Piyush Goyal said foreign entities to like Amazon and Flipkart are determined to ruthlessly destroy India’s retail sector with their deep pockets and vast lobby of legal experts who will stop at nothing before trampling on the lives of over 40 million Indians.

CAIT in a communication sent to Goyal said FDI in the e-commerce section of the 2016/2018 FDI Policy Press Note No. 2, the stipulations of which foreign entities like Amazon and Flipkart are determined to ruthlessly destroy the Indian retail sector with their deep pockets and a vast lobby of legal experts who will stop at nothing before trampling on the lives of over 40 million Indians.

“It is nothing less than a robbery of daylight where the expressive prohibitions of Press Note #2 are grossly and blatantly violated by such derivative foreign entities with their ulterior motives to bring into is working their hidden agenda to control and dominate not only e-commerce but also India’s retail trade in a very clandestine way,” he said.

CAIT said that instead of complying with the stipulations of said press release both in letter and in spirit to uphold the law of the land, these foreign entities are deliberately each of the rules of press release no. 2 treating India as a banana republic.

In such a grim situation and especially in the wake of the current highly flawed e-commerce business, the government has a duty to protect the sanctity of the law, rules and regulations relating to FDI in e-commerce and therefore the need for a new and A new press release replacing FDI Policy Press Release No. 2 is needed of the hour.

Loopholes in the current policy are being exploited by foreign e-commerce giants like Amazon and Flipkart so that these loopholes are properly closed and the policy is implemented as per its original intent.

CAIT said such control allows them to practice predatory pricing, steep discounts, preferential treatment of sellers with dumping of capital through their grassroots affiliated sellers. This is all done to gain market share and make illegitimate financial gains at the expense of the livelihoods of 8.5 crores of small traders, their dependent families and their employees.

To circumvent the restriction imposed on market model of e-commerce, a common practice that these foreign e-commerce giants use is to set up affiliate companies as sellers, so that they have full control of their business through equity and/or or economic participation through their parent companies/groups without falling strictly within the definition of “group company” in the FDI policy.

To fill these gaps, CAIT requested to include highlights for the publication of a new press release on FDI policy in e-commerce. In order to clearly delineate the boundary between “marketplace model” and “inventory-based model”, any type of direct/indirect relationship, equity or economic, between “e-commerce market entity” and “vendor on its platform” should be banned. . To this end, any type of relationship between “Marketplace Entity” and “Seller”, whether direct or indirect, capitalistic or economic or otherwise, must be strictly prohibited.

This prohibited relationship between Marketplace and Seller may include, but is not limited to, group companies, affiliates, related parties, associated companies, beneficial owners, or anyone else who may exercise such control.

He also suggested that the market-based e-commerce model would mean the provision of a digital information technology platform by an e-commerce entity to act as a facilitator between buyer and seller only. .

An inventory-based e-commerce model would mean an e-commerce business where the inventory of goods and services is owned by an e-commerce entity and sold directly to consumers.

The e-commerce marketplace entity and its group companies will not own or control, directly or indirectly, the inventory, meaning the goods or services intended to be sold on the marketplace. Such ownership or control over their inventory will transform the business into an inventory-based model.

The Marketplace Entity and its group companies shall not, directly or indirectly, sell to Sellers inventory of goods or services intended to be sold on the Marketplace. If goods or services are sold by the marketplace group companies and resold on the e-commerce platform, that activity should be treated as an inventory-based e-commerce model, CAIT said.

The seller having ownership or control of its inventory by the group companies of the e-commerce market entity, is not authorized to sell its goods or services on the market. A Seller’s Marketplace Inventory will be deemed to be controlled by an Electronic Commerce Marketplace Entity if such Seller purchases its inventory intended to be sold on the Marketplace directly or indirectly from Group Companies. In addition, each Market Entity and its Affiliates, Group Companies, Associates shall provide all details, information, documents, statements and returns required by the government or any regulatory body, at prescribed intervals or from time to time to verify compliance with the provisions of these guidelines, the ACPI said.

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