The Competition Commission of India (CCI) said that discounting practices by Flipkart may have to be reviewed by the relevant authorities, putting pressure on regulators to clamp down on discounts on online platforms.
On Wednesday, CCI approved Walmart’s $16 billion acquisition of Flipkart but expressed concerns about the latter’s discounting practices. “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 said in its order, referring to complaints by small traders against the deal.
Small traders led by the Confederation of All India Traders had complained about discounting by Flipkart and preferential treatment to specified sellers on its marketplace, among other things.
“…it was found that a small number of sellers in Flipkart’s online marketplaces contributed to substantial sales. Almost all of these were customers of Flipkart in B2B segment, and hence were common customers, availing significant discounts from Flipkart in both B2B segment as well as in the online marketplaces,” CCI said. It’s not entirely clear what CCI meant by the reference to sellers availing significant discounts from Flipkart in the “online marketplaces”. But if the CCI had found that Flipkart was discounting on its online marketplace platform, it may create trouble for the online retailer.
In March 2016, India allowed 100% foreign direct investment in online retail of goods and services under the “marketplace model” through the automatic route, but it banned online marketplaces from influencing product prices directly or indirectly. CCI’s observations are significant particularly in the wake of the draft e-commerce policy released last week. A panel headed by industry minister Suresh Prabhu came up with a policy framework that proposed a separate e-commerce regulator, stricter curbs on discounting, data localization and other regulations that have created uproar in the e-commerce industry. Flipkart and Walmart did not immediately respond to emails seeking comment.
This article was first published on Livemint.com