E-tailers breaching FDI norms, consumers should think who benefits from their purchases: Piyush Goyal

Mumbai: Continuing to voice concerns over e-commerce players like Amazon, Union Commerce Minister Piyush Goyal on Friday alleged that online retailers have not "entirely" followed foreign direct investment laws of the country.

Adding a new dimension to the debate, the minister said consumers should "think" about who benefits from their purchases and take lessons from the debate he has started.

Speaking with reporters after addressing a chartered accountants’ gathering here, Goyal said Indian laws stipulate that only business-to-business transactions are permitted in the country for foreign e-commerce players.

"Sadly, the law has not been entirely followed in letter and spirit … structures to suit have been created which are detrimental to the interest of small traders and small retailers," Goyal said.

The Union minister said the deep pockets of companies like Amazon help them indulge in predatory pricing and also deploy algorithms to influence consumer choice and preferences.

India can "ill afford" problems like the disappearance of mom-and-pop stores and pharmacies the way they have vanished in developed countries like America and Europe, he said, specifying that there are crores of small traders.

He, however, reiterated that the government is all for technology coming into the country and every section has a right to promote its business.

"E-commerce has an important role to play, so do small retailers," he said, adding that the ultimate arbiter will be the consumer.

"I feel even the consumers will have to support … they will have to think when they are making their purchase from any medium about who is benefiting," he exhorted.

Goyal cited the example of the neighbourhood mobile repair shops, saying they have been driven out of business by the big mobile brands who force consumers only to buy new phones.

Goyal said e-commerce companies will use predatory pricing to capture market share and mindspace, and warned that the cheaper purchases done today will force the consumers to buy same goods at a higher rate in the future if the small traders get out of the business.

The Minister sparked off a debate on Wednesday by flagging concerns around the sustenance of small stores in the country in the face of predatory pricing and also warned of social disruptions as more people are rendered jobless.

On Thursday, he followed up by clarifying that the government is not against e-commerce players but wants them to be fair and honest.

The minister had questioned Amazon's announcement of USD 1 billion investment in India, saying the US retailer was not doing any great service to the Indian economy but filling up for the losses it had suffered in the country.

He said that their huge losses in India "smells of predatory pricing", which is not good for the country as it impacts crores of small retailers.

Goyal, a chartered accountant, lambasted the e-commerce companies on Wednesday, questioning their business model that has been impacting small retailers in the country.

"When Amazon says that we are going to invest a billion dollars in India and we all celebrate, and we forget the underlying story that the billion dollars are not coming in for great service or any great investment to support the Indian economy. They made a billion-dollar loss in their balance sheet that year, they had to fill in that loss.

"And how did that loss get caused, they paid Rs 1,000 crores to professionals. I do not know who these professionals are...I would love to know which chartered accountants, professionals or lawyers get Rs 1,000 crores unless you are paying all the top lawyers to block them so that nobody can fight a case against you," the minister said.

On Thursday, he said the government wants to encourage online firms and is also in favour of such entities, which possess "tremendous benefits" like speed and convenience.