As hinted by the Commerce Minister Piyush Goyal last week, the DPIIT has sent a questionnaire to Amazon and Flipkart to collect information in several areas. The exercise appears to be the first step in the process of establishing if the complaints being made by the traders’ body Confederation of All India Traders (CAIT), has any substance at all.
If, based on the feedback being received from the two ecommerce giants, the DPIIT comes to the conclusion that there is basis for a more thorough investigation, such an action may be pursued.
The questionnaire askes these online retailers to let the government know the names of their top five sellers on their respective platforms. The questionnaire then asks what kind of pricing the preferred vendors adopt and the type of support the ecommerce companies provide to the sellers.
Again, as Goyal had indicated, another questionnaire has also been addressed to both the ecommerce companies asking them to furnish details of their respective capital structure, the business model they have adopted and how their inventory is managed. Most of these details, if furnished and are found to be correct, can give a clear idea to the Department for the Promotion of Industry and internal Trade (DPIIT), if there are violations of the FDI rules by these players as alleged by CAIT.
CAIT’s main allegations are related to their deep discounting practices, which, according to CAIT is because Amazon and Flipkart are subsidizing their ‘favourite’ sellers. The other charge is that the companies, which are meant to be just platforms for sellers and buyers to trade, are actually involved in the selling process. CAIT says the evidence for this is that they have setup and are maintaining huge warehouses across the country. DPIIT’s questionnaire includes details on the nature of the association Flipkart and Amazon have with the payment gateways. This may help reveal the extent to which these companies are involved in offering the EMI options, another allegation by the offline retailers.