Amazon, Flipkart urge government to retain foreign investment norms

E-commerce majors Amazon and Flipkart have urged the Indian government to not change the existing Foreign Direct Investment (FDI) rules as it may hurt global investor’s confidence and impact billions of dollars of investments into the industry.

The points were made in an industry meeting called by the Department for Promotion of Industry and Internal Trade (DPIIT) on Thursday to discuss the policy measures and the changes required therein.

It also comes at a time when Amazon is under the lens of the Enforcement Directorate (ED) and Competition Commission of India (CCI) for circumventing the FDI rules and violating the Forteign Exchange Management (FEMA) as well as Competition Act.

Sources privy to the development said that the commerce ministry is considering revision of Press Note 2 rules (2018) , which barred the foreign companies from holding inventories, controlling the price of goods sold on their marketplaces.

Post the framing of these FDI e-commerce rules, allegations have surfaced against the likes of Amazon and Flipkart of restructuring their businesses in India and selling their stake in various seller entities to bypass the rules.Walmart-owned Flipkart and US-based Amazon, however, have maintained that they have not violated the laws of the land and that any policy changes will have “disastrous consequences” on both the investor’s confidence and hit the small businesses.

Other players like Reliance, Grofers, Snapdeal, Big Basket batted for a more effective implementation of the existing FDI in e-commerce rules. Reliance Industries which forayed into e-commerce with its venture Jio Mart last year said that the foreign firms have violated the rules by creating complex business structures.

A draft e-commerce policy, which is in the works, stated that these marketplaces should not prefer only a few sellers on their platforms and indulge in deep discounting as it creates unfair competition in the market. Various traders’ bodies have also taken Flipkart and Amazon to court for favouring large sellers like Cloudtail and Appario on their platforms.