The Indian Cellular Association, ICA, a body representing the manufacturers of mobile phones, has made a written representation to the Union Commerce Minister Suresh Prabhu and also personally met him as a delegation, with the objective of requesting the government to take action against leading online retail players Amazon and Flipkart for unfair trade practices. Their main complaint is that the online retail giants are taking undue advantage of FDI rules and offering huge discounts on mobile phones and other devices much to the detriment of the offline retailer. According to ICA, this situation has put the businesses of the offline retailers and the livelihood of around 60 million people employed by them in jeopardy.
There are a few technical points raised by ICA in its representation to substantiate its allegation. One relates to the Press Note 3 on foreign direct investment (FDI) issued by the government which stipulates that the online retail firms cannot stock the products and sell them directly to the customers. Only B2B transactions are permitted as far as Amazon in concerned. It can allow its platform to be used by sellers to offer their products to the customers. But this rule is being circumvented, according to the ICA.
The wording in the written representation given by the trade body to the government is quite harsh in its tone and tenor. It calls the action by the online retailers ‘economic terrorism’ on the country and should be meted out punishment as such. They want them booked under the PMLA statute as well.
Amazon has, obviously denied all these allegations. It has claimed that any discount offered on its platform is from the side of the sellers and not by it.
But ICA has not only described the modus operandi adopted by Amazon and Flipkart to show that they are not directly offering the discounts but has gone on to list the names of the entities and sellers linked to these online retailers to press home their point. They have named Amazon Seller Services, Amazon Wholesale India Pvt., Amazon Pay and sellers on Amazon platform such as Green Mobiles, Rocket Commerce, Darshita Electronics as the companies linked to Amazon in some form or the other. In the case of Flipkart, the names of sellers and others are: Flipkart Internet Pvt. Ltd., Flipkart India Pvt. Ltd., Ekart Logistics, PhonePe and sellers such as Retailnet, SupreComnet, Omnitech Retail, Trunet Commerce and India FlashMart. As per ICA’s version, all these sellers and other companies are shown to have borne the losses on their books by offering the discounts on mobile phones, whereas it is Amazon and Flipkart that bear it.
They have also pointed out the expenses are spread over many heads of accounts like returns, liquidation, packaging, fulfilment cost and seller compensation. The ICA also has said that phone makers like Xiaomi make bulk supplies of devices at knocked-down prices to the two online retail giants and this itself gives them an advantage of around 15% which is not available to the retailer in the brick and mortar model.
For the record, the ICA boasts, among its members, Apple, Micromax, Nokia, Vivo, Lava and Lenovo/Motorola.