E-commerce companies may be in major trouble over deep discounts

New Delhi: E-commerce companies like Flipkart, Amazon and others could soon find themselves under investigation by the Competition Commission of India (CCI) for indulging in deep discounting and according preferential treatment to select sellers on their platforms, something that is prohibited under the 2016 Foreign direct investment (FDI) policy. The CCI sounded this warning while granting approval to the Walmart-Flipkart deal on August 8.

Still sounding a warning that it would not hesitate to probe such players at a time of its choosing, the CCI said, “There is no bar on the Commission at any point of time to examine such issues under the relevant provisions of sections 3(4) and 4 the Act and regulations made there under.”

The observations on such violations by the marketplace-based e-commerce companies have been noted first for the first time by any statutory body since the enactment of the 2016 FDI policy which bars them from discounting as well sourcing bulk of their products from preferred sellers.

“As per FDI Policy an e-commerce platform cannot influence market prices directly or indirectly. However, this is a matter of consideration for the appropriate regulatory/enforcement authority,” the CCI has said.

Under scanner

  • This is the most damning indictment of the practices adopted by Flipkart and other online retailers by a statutory body though offline retailers as well as some trade bodies have been alleging this.
  • In fact, the CCI examined this aspect upon a complaint by the body of small traders, CAIT.
  • This body has consistently maintained that Flipkart and other online players indulge in direct discounting and accord preferential treatment to a set of sellers.
  • However, despite such harsh observations on Flipkart’s practices, the CCI did not hold back approval to the deal between it and Walmart because it felt that the violations had no connection with the “competition dimension of the proposed combination”.
  • “The Commission notes that majority of the concerns expressed in representations have no nexus to the competition dimension of the Proposed Combination,” CCI said while approving deal.