E-commerce majors accused of flouting rules amidst festive sales frenzy
In a complaint this week to the Department for Promotion of Industry and Internal Trade (DPIIT), Madras High Court lawyer K Narasimhan has accused Flipkart of influencing prices for select sellers and funding discounts, creating an uneven playing field in the e-commerce marketplace.
Narasimhan claims Flipkart has been offering selective waivers at the product level, directly impacting the pricing of certain sellers. This, he argues, creates a "skewed and non-competitive environment" that stifles competition and hurts the broader seller ecosystem.
Allegations among festive sale
The allegations have surfaced amidst the ongoing annual festive season sale events organized by major e-commerce companies like Flipkart, Amazon, and Myntra. The Confederation of All India Traders (CAIT) has also called for the suspension of these sales, claiming that they further harm domestic traders through the continued use of anti-competitive practices.
Rules and Regulations Allegedly Being Violated
The primary rule that Flipkart is accused of violating is the prohibition on e-commerce companies interfering with or influencing the price of products listed on their platforms. This is enshrined in the Consumer Protection (E-Commerce) Rules, 2020, which were enacted to ensure fair trade practices and protect the interests of consumers and sellers.
The alleged rule violations
Consumer Protection (E-commerce) Rules, 2020: The rules prohibit e-commerce entities from directly or indirectly influencing the sale price of goods or services offered on their platforms.
Competition Act, 2002: The Act prohibits anti-competitive agreements and abuse of dominant market position, which could include predatory pricing or discriminatory practices.
Foreign Direct Investment (FDI) Policy: The policy for e-commerce marketplace entities restricts them from influencing the selling price of goods and services and mandates a level playing field for all sellers.
E-commerce companies' defence
Flipkart has not yet responded to the allegations. However, e-commerce companies typically argue that discounts and promotional offers are essential for attracting customers and driving sales, especially during the festive season. They also claim that these practices benefit sellers by increasing their visibility and reach.
If found guilty of violating the Consumer Protection (E-Commerce) Rules, 2020, Flipkart could face penalties under the Consumer Protection Act; penalties may include fines and imprisonment for the individuals responsible.
This is not the first time that Indian e-commerce majors have faced scrutiny for their business practices. In the past, both Flipkart and Amazon have been investigated by the Competition Commission of India (CCI) for alleged anti-competitive behavior.
The allegations against Flipkart have once again brought to the fore the concerns about the dominance of large e-commerce companies in the Indian market and their impact on small and medium-sized businesses. The government and regulatory authorities are likely to face increasing pressure to take action to ensure a level playing field for all players in the e-commerce ecosystem.
