Predatory pricing stifles online sellers, govt pays no heed to complaints

Online sellers

Two years ago, the All India Online Vendors’ Association (AIOVA), a group of 2,000 sellers on various online platforms, wrote a letter to the Competition Commission of India (CCI). The letter said that Flipkart’s WS Retail and Amazon’s Cloudtail were indulged in predatory pricing and discounting when selling their private label products, which was destroying the business of smaller rivals and online sellers.

Within a few weeks of the complaint, another body, Department of Industrial Policy & Promotion (DIPP) introduced guidelines for e-commerce players in India. The guidelines clarified definitions of ‘ecommerce’, ‘inventory-based model’ and ‘marketplace model’.

It also allowed 100 per cent foreign direct investment in business to customers (B2C) in marketplace model ecommerce.

Besides, it took care of predatory pricing, limiting discounting and capping sales from one vendor. It said that an e-commerce entity will not permit more than 25 per cent of the sales affected through its marketplace from one vendor or their group companies. And e-commerce entities will not directly or indirectly influence the sale price of goods or services. They shall maintain level playing field.

However, between 2016 and 2018, the status quo on predatory pricing and discounting is maintained. The e-commerce players are still offering heavy discounts on private label products and there is no such level playing field between online marketplace companies and online sellers.

On top of it, AIOVA, which represent a group of online sellers, has also lost all hopes and abandoned plans to raise concerns with the government, alleging inaction on its part and favouritism to companies such as Amazon and Flipkart.

Despite writing to various government departments such as Niti Aayog, DIPP, CCI and Commerce and Finance Ministry, raising serious concerns in the e-commerce segment, the government hasn’t paid any heed.

Talking to ET, the sellers’ organisation said, “We are not entertaining any sellers’ plea or prayers such as stuck payments, technical issues, frauds and many other things as we have realised that we cannot do anything apart from shouting about these issues to deaf ears.”

Interestingly, after issuing guidelines for e-commerce companies, the DIPP had then issued stern warnings for online retail players violates the FDI policy on e-commerce and offers discounts to customers.

The industry body was very clear in its approach while framing guidelines and included rules to end all sort of inefficiencies in the ecosystem. However, the gap between inscription of policies and its implementations have remained widened.

Consumers’ activists have also warned against such high discounts offers made by online companies. They believe the cash-filled companies are trying to eliminate competition through discounts and have warned consumers that if the competition has been eliminated, consumers would have to accept higher prices.

Online biggies like Flipkart and Amazon are not ready to accept that they are bypassing any rules. Flipkart has previously said it conducts its business with transparency, integrity and in compliance with all applicable laws.

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