Amazon, Flipkart accused of violating FDI rules

Indian Cellular Association (ICA) has accused e-commerce platforms of violating foreign direct investment (FDI) rules as they offer direct and indirect discounts on mobile devices and other products through intermediaries or partner companies. ICA has also asked e-commerce minister Suresh Prabhu to take steps against popular e-retailers Amazon and Flipkart.

ICA representatives alleged that the companies were bypassing rules under Press Note 3 on FDI by holding inventory and influencing the prices of electronic goods. This is not only affecting offline retailers' revenue, but also putting at risk the jobs of around 60 million people.

"In the view of the alarming situation that the industry and India are facing, we request urgent and severe action against Amazon India and Flipkart for rampant violations of the conditions of Press Note 3 by both directly and indirectly influencing the sale price of mobile phones and other goods," ICA stated in a letter to Prabhu.

The ICA, which represents phone manufacturers including Apple, Nokia, Vivo, Lava, Micromax and Lenovo/Motorola, wanted "necessary amendments" in Press Note 3 and other related laws to ensure that violators face "severe consequences" under the Prevention of Money Laundering Act "by treating the behavior of the companies as an act of economic terrorism against the country."

Amazon, however, has denied all the allegations. "Amazon remains committed to comply and is in compliance with all applicable Indian laws and regulations," said a spokesperson of the company.

"The prices for products on the Amazon.in marketplace are completely determined by the sellers." Flipkart, on the other hand, has decided to keep mum.

The battle between online and offline retailers have been going on for long now, and this recently development has just added fuel to the fire. Offline retailers had previously said that e-commerce platforms are only able to offer large discounts because they use foreign capitals. They have further claimed that two online retailers are using companies closely associated to them to provide discounts indirectly to buyers.

Source: ET