FlipKart and others offering heavy discounts may receive a regulatory probe
FlipKart and many other online marketplaces are in a practice of throwing heavy discounts to attract their customers which is now inviting the observation of regulatory bodies. Competition Commission of India is likely to initiate a probe into the practice of all big and small ecommerce platforms to arrest this practice which has already been banned.
Though, WalMart’s acquisition of FlipKart for $16 billion has been approved officially, the probe on discounting mechanism is supposed to be continued. In March 2016, 100% foreign investment in Indian ecommerce market was allowed under the “marketplace model”, but it had already laid regulations on not influencing the prices of the products directly or indirectly. On Thursday itself, flipKart along with Amazon and Paytm mall were observed to offer huge discount up to 70% on a number of products. The categories included books, smartphones, TV, and clothing. However, the giants are claiming that the offers were given by third-party sellers and not by them. Still, CCI does not hold any accordance to their statement and strongly denounce the discounting practice as well
as supplier relationship of FlipKart.
CCI said in its order that “the issues concerning FDI (foreign direct investment) policy would need to be addressed in that policy space to ensure that online market platforms remain a true marketplace providing access to all retailers.” CCI has also implied that FlipKart and Amazon have fouled the current FDI policy that forbids discounting like this.
According to Avimukt Dar, which is a partner at law firm IndusLaw, “it is unlikely that CCI’s general observation will have an impact in itself since they have expressly stated that FDI policy interpretation is not under their remit nor is it something which is relevant for the Walmart-Flipkart deal from a competition law perspective.”
It is to be noted that in 2013, ED has already investigated big ecommerce firms like snapdeal, flipkart, and Myntra for possible violation of FDI rules, however, no significant action was taken. This move has resurfaced now one again.