The Rajasthan High Court on Tuesday issued a notice to the central government seeking its reply on a plea by a traders' body which has alleged violation of FDI rules by e-commerce giants Amazon and Flipkart.
The Confederation of All India Traders (CAIT) moved the petition accusing the e-commerce companies of working in contravention of the FDI rules and promoting loss funding with a view to capture the market.
Admitting the petition, Justice Dinesh Mehta issued notice to the central government and has listed the matter for hearing on October 14.
"These companies have resorted to unethical trade practices and have resorted to loss funding by giving discounts extending up to 90 per cent with a view to capture the market," argued the petitioner's counsel Rajvendra Saraswat.
Asked about the matter, Flipkart said it was fully complying with FDI rules and was not aware of the litigation, while an e-mail sent to Amazon India did not elicit response.
Saraswat alleged in the court that the e-commerce companies are engaged in two types of violations in their online selling practices.
"One is that you cannot have a pre-determined price of any product while selling and the other is you cannot have ownership of the inventory," Sarswat said, adding that most of the goods they are selling belong to their own companies.
The petitioner association has also stated that the selling ecosystem by these companies has drastically harmed the domestic market as right from the staggeringly discounted prices, these companies are not only providing free delivery but have also an option of returning the product.
Sharing statistics, Saraswat claimed in court that these companies bore a loss of a whopping Rs 7,500 crores last year.
But in order to take control of the market, they have been deliberately been bearing this loss, he claimed.
While quoting some examples, the petitioner alleged that the objective of these companies is to destroy the domestic market by way of loss bearing and then enjoy a monopolistic market.
The court granted liberty to the petitioner's counsel to send copies of the plea and the notice issued to the Centre to these e-commerce companies by email.
Reacting to the allegations, a Flipkart Spokesperson said, "We're not aware of any litigation and haven't received any notice so far. We're fully compliant with FDI laws of the country."
"We are a marketplace player and work closely with lakhs of our sellers, artisans, SMEs across the country and help them connect with more than 160 million customers across India.
"We're proud of our work to make these sellers/artisans successful and help in economic growth and job creation in India," the spokesperson said.
The CAIT, which was also represented by counsel Abir Roy, claimed in a statement that its petition highlighted the "continuous and repeated violations of the FDI policy by Amazon and Flipkart since years and repeated FDI violations by them since they are engaging in deep discounting, predatory pricing, loss funding and controlling the inventory thereby converting their market place as inventory based model which is a clear violation of FDI policy".
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