India’s Commerce Ministry To Probe Mega Sale Discounts
The top e-tailer companies in India have been having a great month as each of them took turns to launch their special billion dollar sale in an attempt to sell a record number of products and pull in record revenues. Companies like Amazon, Flipkart and SnapDeal have been aggressively promoting and marketing their special seasonal sale and appear to have had a great response.
India’s commerce ministry has been keeping a close watch on these e-tailers and after their billion dollar day sales has decided to launch an investigation to see if these companies have violated any laws. The commerce ministry has instructed the Reserve Bank of India (RBI) and the Enforcement Directorate (ED) to start a probe and target these companies to see if they have violated laws, especially those that prevent these e-tailers from operating on a business to consumer (B2C) based model.
The ministry decided to take action after an official complaint was lodged by the Confederation of All India Traders (CAIT) who believe that these e-tailers have not stuck to the business-to-business (B2B) model that they are licensed to operate and instead used their websites to engage in a B2C model. The traders have been complaining about a steady decline in their revenues and customers as these giant e-commerce portals now make it easy for the Indian customer to sit in the comfort of their homes and order from a wide variety of choices. To make things even more difficult for the traders, is the fact that these websites are able to offer a discounted rate that the traders are not able to compete with anymore.
The CAIT complaint highlighted the fact that companies like Flipkart, SnapDeal and Amazon used social media, print and electronic media to directly advertise and solicit the general public to their websites which was a direct violation of the law they were supposed to operate under.
CAIT sent in a letter to the Department of Industrial Policy and Promotion (DIPP) Secretary Amitabh Kant which said
Since they have received foreign investment, they are allowed to undertake B2B e-commerce activity and not B2C. The said advertisements addressed to the public in general tantamount to retail trading.
The commerce ministry has asked the ED to complete the investigation and then take appropriate action based on the final report. Flipkart and Amazon have preferred not to comment on the issue while Snapdeal states that the website is an ecommerce platform that connections sellers and buyers to help with transactions and did not address the accusation directly.
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