CAIT writes to PM on Amazon, Flipkart discount sales

In the letter, CAIT urged for PM Modi's attention to the business model of Amazon and Flipkart. CAIT believes that these companies are violating the Press Note 2, which updated the government's 2018 FDI policy. It added that this has created an uneven playing field, unfair and unethical competition and destabilized retail trade of India.

New Delhi:The fight between Confederation of All India Traders (CAIT) and e-commerce giants Amazon and Flipkart over predatory pricing and deep discounting has reached a new high with the traders body approaching the Prime Minister Narendra Modi for his intervention for violation of FDI Policy by the e-commerce companies.

CAIT has sought an appointment from the PM to discuss these issues.

In the letter, CAIT urged for Modi's attention to the business model of Amazon and Flipkart. CAIT believes that these companies are violating the Press Note 2, which updated the government's 2018 FDI policy. It added that this has created an uneven playing field, unfair and unethical competition and destabilized retail trade of India.

"The question is whether ecommerce companies like Amazon & Flipkart will be allowed to violate the policy of the government, whether brand owing companies and banks will be allowed to create a cartel with these ecommerce companies and whether any investigation will be conducted by the government into their business model. Or, they will be allowed to make Indian ecommerce market as a free playground where they will operate the business as per their wish," it said.

CAIT National President B.C. Bhartia and Secretary General Praveen Khandelwal have objected to the business model of both the companies.

"It is a well accepted fundamental principle of trade that loss acquiring business entities can not sustain long in the market unless backed by financial institutions or investors to sustain losses. It is most surprising
that both Amazon & Flipkart are suffering huge losses for many years, but they not only continue their business activities but also hold big sales" every year", it said.

As per latest information, it said, Amazon has registered cumulative losses of over Rs 7,000 crore across various units in 2018-19 whereas revenue increased by 54%.

On the other hand, it said, Flipkart registered loss of Rs 5,459 crore whereas the combined revenue shot up by 44%. It is a unique case where sales are amazingly growing every year but on the same side losses also increased to a huge extent in case of both Companies, it added.

It also appears that there is a nexus between these companies, brand owing companies and a few banks for creating an unfair competition in Indian ecommerce market as brands are supposed to offer extraordinary prices exclusively to these companies which is against the Competition Act, CAIT said.