Club Factory flouts govt’s price control for masks and sanitizers

Chinese e-commerce marketplace Club Factory is flouting India’s price control for masks and hand sanitizers, trying to profit from flash sales of over-priced essential products on its platform during the times of a global pandemic.

Entrackr has found that a single disposable mask is being sold for Rs 104 – six times the government-regulated price. Similarly, a 60 ml bottle of hand sanitizer is being sold for Rs 178 against the government cap of Rs 30.

The rising number of coronavirus cases in India has sent customers scrambling to pharmacies and online platforms in hunt for masks and sanitizers. There is currently more demand than supply with users searching for these products on online platforms including Amazon, Flipkart, Snapdeal, 1Mg, and Netmeds.

Keeping in mind the essential nature of these two products, the Department of Consumer Affairs had announced a price cap for disposable masks and sanitizers. 

According to its orders dated March 21 and 24, the ministry mandated that the price of a mask cannot exceed Rs 8 for a 2-ply mask, Rs 10 for a 3-ply mask and Rs 16 for a 3-ply mask with a layer of melt-blown non-woven fabric. In the same order, the price limit for sanitizers was also capped at Rs 100 per 200ml. These price caps will remain in force till June 30.

However, despite the government’s clear guidelines, Club Factory is openly violating the price control order. 

Before the cap was announced, prices had reached almost Rs 40 for a simple disposable mask and a 50 ml bottle of sanitizer was being sold in excess of Rs 200 as stocks emptied from offline and online shelves. The government cracked the whip, raided some large distributors and mandated online platforms to follow the price control strictly.

Given that cities like Delhi, Mumbai and the state of Uttar Pradesh have made wearing of masks compulsory in public, Entrackr reviewed multiple platforms on April 9 to see if price control was being followed. 

Checking multiple listings for disposable masks on Amazon, Flipkart, Snapdeal, 1Mg and Netmeds, we found that masks were being sold for between Rs 8-16 per piece and in compliance with the order.

However, Club Factory was found to be in a violation by selling plain disposable masks for as high as Rs 104 per piece. A simple search for masks for coronavirus showed up the following listings on Club Factory’s app: Rs 159 for 4 or Rs 39.75 per mask, Rs 221 for 8 or Rs 27.6 per mask, Rs 279 for 10 or Rs 27.9 per mask. The over-charging ranged from 18% to a whopping 550%.

We also checked the price breakup and found that the listed price was only for the masks since shipping is free as the company is allowing only online payment for these orders (last pic above). And going by Club Factory’s captions on the products, it has sold thousands of such masks. 

A similar story repeated on its app when searched for sanitizers. A small 60 ml bottle that should be priced at Rs 30 is listed for Rs 178. A 500 ml bottle that can be sold for a maximum price of Rs 250 was priced at Rs 699. 

Again, we cross-checked the price breakup and found that the listed price was only for the product as shipping was free.

What’s worse is that Club Factory is actively promoting the exorbitantly-priced products through flash sales — (flash sale visible on two sanitizer posts: the ones with prices marked as Rs 178 and 495).

Globally, too, e-commerce platforms such as Amazon and Ebay have had strict restrictions on vendors not jacking up the price of sanitizers. In fact, when an Amazon merchant in the US hoarded 17,700 bottles of sanitizers to profit off of its sale, his product listings were taken down the next day.  

Not the first time

The sale of such basic medical essentials is apparently a part of ‘Project Ginger’ that Club Factory launched in March. 

According to an ET report, Club Factory had pitched this to sellers on its platform as an opportunity to make financial gains during the lockdown and touted this as a chance for continuous cash flow without a warehouse. 

The report also revealed that Club Factory in its communication to sellers had said it would also facilitate the purchase, custom clearance, warehousing and shipment to consumers.

Entrackr has reached out to the government’s Department of Consumer Affairs and to Club Factory for comment. While our detailed queries remained unanswered by Club Factory, it's founder Vincent Lou, via WeChat, said that we as a marketplace don't have the technology to control the price. Sellers set their own price.

We will update this story as we hear from the government.

Club Factory is no stranger to controversy in India. In November 2019, Entrackr had uncovered a wide range of fakes being sold on its platform, including copies of well-known global brands like Chanel, Louis Vuitton, Gucci, Ray-Ban and Nike. Counterfeits of leading Indian brands like Titan and Indulekha Hair Oil from Hindustan Unilever were also being sold.

Over the past 18-24 months, Club Factory and its senior local officials have been named in several FIRs for selling counterfeit products on its platform.

In 2019, the government banned the practice of e-commerce imports being dumped into the country by under-invoicing them or labelling them as gifts. The crackdown had impacted Club Factory’s business in a big way, with its heavy emphasis on importing products from China.