CAIT said that the Flipkart group intends to make Aditya Birla fashion a preferred seller in its marketplaces, which is a violation of FDI policy.

Flipkart office in Bengaluru
Atom E-commerce Wednesday, October 28, 2020 - 17:24

The Confederation of All India Traders (CAIT) has questioned Flipkart’s proposed deal with Aditya Birla Fashion and Retail to pick up a 7.8% stake, stating that the deal is a violation of FDI policy. In a letter to Union Commerce Minister Piyush Goyal, CAIT said that the deal violates provisions of the Press Note 2 of the FDI policy. 

CAIT said that stock exchange filings show that the Flipkart group intends to make Aditya Birla fashion a preferred seller in its marketplaces, which is a violation of FDI policy.

“The present FDI policy clearly prohibits a foreign company to venture in any forms of multi brand retail trading (MBRT) including through e-commerce by having any equity interests in the sellers on the market-platform, or directly/indirectly controlling their inventory through side agreements, or under the garb of B2B e-commerce,” the letter to Piyush Goyal states. 

It urges him to prohibit Aditya Birla Fashion from directly or indirectly selling its inventory on marketplace platforms that are owned or controlled by the Flipkart Group, and not allow the FDI till there is such an undertaking.

“The restrictive provisions in FDI policy, through press note 2 of 2018, were made to protect the small traders/kirana shopkeepers and Indian industry from the onslaught of capital duping by foreign multinational companies and any violation of such provision must be strictly dealt with,” the letter further adds.

CAIT National President BC Bhartia and Secretary General Praveen Khandelwal said that this comes at a time that they are awaiting action against e-commerce marketplace entities violating norms and that  “However, being encouraged with violations of these provisions by various other e-commerce players in the past and one company of the deal being a habitual offender of policy and again the same unethical practices and violation of FDI Policy is about to be committed by Flipkart and ABFRL,” the letter further alleged. 

Aditya Birla and Flipkart had made the announcement last week, when the companies said that the strategic partnership is “aimed at enhancing the consumer fashion experience” and “leverage synergies in the fashion segment”. Aditya Birla Fashion had said that it will use the capital to propel its growth as it plans to scale-up in emerging high-growth fashion.

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