Domestic retail bodies seek Flipkart-Walmart deal probe

Current rules stipulate that e-commerce players can't source more than 25% of products sold from a single seller

Domestic retail bodies that claim the Flipkart-Walmart deal represents a backdoor entry by multinational giants into India’s retail space, are now pushing for the Enforcement Directorate (ED) to initiate an official probe into the multi-billion dollar deal.

On Friday, the Confederation of All India Traders (CAIT) announced it filed a complaint with the ED against Flipkart, alleging that the e-commerce major violated government's foreign direct investment (FDI) norms. 

CAIT said: “We have urged the ED to investigate the business module of other e-commerce companies also as largely everyone is circumventing the law, Flipkart is one example of that.” 

CAIT has charged Flipkart with engaging in the inventory-based model of e-commerce, where the inventory of goods and services is owned by the e-commerce entity and sold to the consumers directly. No FDI is currently allowed in this particular model of business.

On the other hand, a marketplace model of e-commerce means the company simply provides an information technology platform on a digital and electronic network to act as a facilitator between the buyer and the seller. Current rules also stipulate e-commerce players can’t source more than 25 per cent of all products sold on their platforms from a single seller.

CAIT had earlier said that major players, including Flipkart, were violating this rule as well. “Its own admission before a tax authority shows Flipkart is engaging in buying goods which are ultimately sold on their platform. Flipkart tried to circumvent the law by routing the sales via their preferred sellers, who are their affiliates,” the traders’ body said. 

A similar complaint by the Swadeshi Jagran Manch (SJM), supported by the Rashtriya Swayamsevak Sangh, has been forwarded by the commerce and industry ministry to the ED. A complaint by SJM had reached the department of industrial policy and promotion (DIPP). However, the DIPP has instead forwarded the complaint to ED, the Reserve Bank of India and the Competition Commission of India.