After ICA, retailers association blames Flipkart and Amazon for violating FDI policy

After facing flak from Indian Cellular Association (ICA), Flipkart and Amazon again find themselves in trouble as Retailers Association of India (RIA) has raised the issue of FDI rules violations by the e-tailers.

A group of offline retailers including Future Group and Reliance Retail has alleged that the aforementioned e-commerce players are flouting the rules imposed under government's foreign direct investment (FDI) policy.

In a complaint to Commerce Minister Suresh Prabhu, the association alleged that these marketplace models have been operating against the spirit of the policy. It further added that these firm have been influencing prices on their platforms and illegally offers abnormal discounts.

The issue comes under the Press Note 3, which reads 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 guidelines, e-commerce firms can function as a marketplace to connect buyers and sellers, and not influence prices.

Merely a week ago, Indian Cellular Association (ICA), had approached the Commerce Minister, demanding strict action over discounts offered by the two top e-commerce companies.

The apex body of the local mobile industry also said 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.

In September, last year a similar issue was raised by traders body The Confederation of All India Traders (CAIT). They had urged the government to take action against e-commerce firms like Amazon and Flipkart for flouting FDI norms by undertaking retail trading activities.

Flipkart has denied these allegations saying that they conduct their business with highest standards of integrity and in compliance with applicable laws. Amazon on similar note said the company is a pure third-party marketplace, the company is in compliance with all applicable laws, including Press Note 3.

The development was reported by ET.