Govt asks RBI, ED to probe if top e-tailers flouted rules

 The Commerce Ministry has requested the Enforcement Directorate and the RBI to examine whether eCommerce majors Flipkart, Amazon and Snapdeal violated FDI rules by engaging in business-to-consumers (B2C) activity.

The move followed a complaint filed by traders’ body CAIT which alleged that the e-Commerce portals circumvented law and engaged in B2C activity as 100 per cent FDI is allowed in the business-to-business (B2B) segment.

“It’s requested that the matter may be examined and appropriate action may be taken,” said a letter by the ministry addressed to ED and RBI.

In its complaint, CAIT stated that Amazon, Flipkart and Snapdeal, which recently conducted mega sales, solicited the general public through big advertisement campaign in print, electronic and social media.

“Since they have received foreign investment, they are allowed to undertake B2B eCommerce activity and not B2C. The said advertisements addressed to the public in general tantamount to retail trading,” CAIT said in a letter to the Department of Industrial Policy and Promotion (DIPP) Secretary Amitabh Kant.

A Snapdeal spokesperson said: “Snapdeal is a technology platform that connects sellers with buyers to facilitate transactions. As a pure marketplace, we serve a rapidly expanding base of sellers, who find value in connecting with a large universe of buyers.”
The CAIT’s argument is that since ownership of inventory is not held by the said companies, they can not offer ‘sale’ or ‘discounts’ in totality on their online portals. “Doing so establishes that they are not marketplace and as such openly flout FDI policy,” it added. CAIT appealed that the three online retailers should be restricted to conduct such sales and immediate directions may be passed to them for violation of the Consolidated FDI Policy.

According to the Consolidated FDI Policy Circular 2015, eCommerce activity refers to buying and selling by a company through online platforms. Such companies would engage only in B2B eCommerce and not in retail trading, inter alia implying that existing restrictions on FDI in domestic trading will be applicable to eCommerce as well.

Rule-Play

Commerce Ministry writes to ED and RBI to examine if eCommerce players violated FDI rules, and to take action
ECommerce giants Flipkart, Amazon and Snadeal are being considered for the probe by the ministry 
The move follows a complaint filed by traders’ body CAIT that the companies ‘flouted laws’ and engaged in B2C