It looks like the Government of India is taking a closer look at the “hefty discounts” offered on Flipkart and Amazon. The Commerce Ministry informed that the government will focus on the discounts issued during the recent festive sales. This announcement comes after retailers issued a complaint that Flipkart and Amazon were likely violating foreign investment rules. For some context, the government introduced a set of new rules for foreign investment back in February. The new set of rules was crafted to protect about 130 million people dependent on small-scale retail businesses.
Flipkart and Amazon under the scanner
As per a report from Reuters, these new rules forced e-commerce giants to tweak their business structure. The government made these new rules to discourage “big online discounts”. After the enforcement of the new rules, both e-commerce giants claim to have made the necessary changes. However, a number of complaints from local trade groups allege that e-commerce players are violating the rules by “burning money” to provide discounts. The complaint also highlighted the fact that some discounts extend beyond the 50 percent mark during the ongoing festive sales.
Commerce Ministry indicated that the government is currently reviewing the complaints along with the associated evidence. The report also highlighted the information uncovered in emails and internal training material from Flipkart. This information indicated that Flipkart offered to reduce or completely remove its sales commission to sellers offering discounts. As per the report, the Confederation of All India Traders (CAIT), a group that represents about 70 million physical retailers filed the complaint.
The government has already met executives from Flipkart and Amazon last week regarding the complaints. Issuing a statement regarding the meeting, Flipkart stated that “it had a ‘good meeting’ with government officials’. Amazon India also stated that it had “an open and transparent discussion” with government officials. Both e-commerce giants are currently running full-page advertisements in newspapers and online to promote their Diwali sale events. CAIT stated that retail stores across the country reported about 30 to 40 percent decrease in sales this month as buyers opted for online shopping.