Govt sets up panel to monitor deep discounting by Amazon, Flipkart and others

E-commerce in India is known for discounting and running loss-laden businesses. While the practice along with convenience and large assortments have been making consumers to drive 2 million e-commerce order volume every day, the consistent discounting element has always been a matter of contention for offline retailers.

Since the festive season around the corner, e-commerce companies such as Amazon, Flipkart, and Paytm Mall will be splurging about $1 billion on compelling deals to woo shoppers.

The upcoming discounting extravaganza has concerned traders bodies including Confederation of All India Traders (CAIT) and Retailer Association of India (RAI). CAIT urged the government to bring Anti-Predatory Pricing Act for regulating e-commerce business in India.

The body believes that interest of traditional retailers must be protected by bringing Anti-Predatory Pricing Act. Acting on the request of CAIT, Ministry of Corporate Affairs (MCA) has set constituted a 10 members panel to monitor the practice of deep discounting by e-commerce companies.

Besides monitoring discounts, the panel would also examine if online retailers are required to put a cap in their access to dealerships from manufacturers. Brick & mortar retailers are preparing recommendations to the panel for killing discounted sales organised by the likes of Amazon and Flipkart.

According to traders bodies, discounts offered by online retailers are actually predatory pricing and shouldn’t be treated as discounts. They will be requesting commerce ministry to put a complete ban on discounted sales by deep-pocketed e-commerce companies. The practice of deep discounting is creating an uneven playing field for brick & mortar and traditional retailers.

Importantly, the government is drafting a policy for e-commerce that recommends strict restrictions ranging from limiting discounts to protecting the interest of offline retailers. However, the government has been going slow with the draft as it is opposed vehemently by online retailers.

Of late, sellers bodies such as AIOVA have been piling up complaints against Amazon’s Cloudtail, Appario and Flipkart’s WS Retail for favoring their in-house merchants over independent sellers.

Given that the discount has been a major driver of e-commerce in India, it’s unlikely to face a blanket ban. While the government has begun drafting a policy framework for e-commerce in the country, several departments have differences over issues with the initial recommendations.

The development was reported by Mint.