ICA approaches Suresh Prabhu for flouting FDI rules by Amazon and Flipkart

Major e-commerce players such as Amazon and Flipkart have again faced allegations for flouting FDI rules in the country. This time handset maker’s lobby Indian Cellular Association (ICA), has approached Commerce Minister Suresh Prabhu, demanding strict action over discounts offered by the two top e-commerce companies.

The apex body of local mobile industry alleged that both e-commerce players were violating FDI norms by offering discounts, directly or indirectly, on mobile phones and other products through intermediaries or partner companies.

ICA, representatives who met Prabhu also blamed that these e-tailers were circumventing rules under Press Note 3 on FDI by holding inventory and influencing the prices of electronic goods, eroding offline retailers’ revenue and putting at risk the jobs of nearly 60 million people.

ICA represents several mobile handset makers in India such as Micromax, Apple, Nokia, Vivo, Lava and Lenovo/Motorola. It has sought necessary amendments in Press Note 3.

Under the Press Note 3, 100 per cent FDI is only allowed under automatic route, only if the companies are engaged in B2B sales, but is not applicable to B2C transactions.

As per the law, online retailers cannot have an inventory-based model, under which goods can be directly sold to consumers. As per the guidelines, e-commerce firms can function as a marketplace to connect buyers and sellers, and not influence prices.

Amazon has denied the allegations, saying that the company remains committed to complying and suggested that it has adhered to all the laws and regulations in India. “The prices for products on the Amazon.in the marketplace are completely determined by the sellers,” told company's spokesperson.

Flipkart is yet to respond to the allegations made by ICA.

This is not the first instance for these Indian e-tailers who are facing the heat for creating competition by means of illegal discounts. Earlier, traders body The Confederation of All India Traders (CAIT) had urged the government to take action against e-commerce firms like Amazon and Flipkart for flouting FDI norms by undertaking retail trading activities.

In February, the Income Tax department had imposed a fine of Rs 110 crore after refusing Flipkart’s appeal on tax relaxation. The e-commerce firm has been asked to reclassify discounts and marketing spend as capital expenditure, failing to which it will have to pay the amount to income tax for the year 2015-16.

The development was reported by ET.