You must have read in these columns a few days back on the Indian Cellular Association (ICA) had made a representation to the Union Commerce Ministry that the ecommerce giants like Amazon and Flipkart are offering huge discounts on mobile phones on their platforms leading to the crippling of the offline segment that sells mobile phones.
Now it seems the government has acted on that complaint and the letter written by ICA has since been forwarded by the Commerce Ministry to the Enforcement Directorate (ED) and the Reserve Bank of India to investigate the matter.
The crux of the issue here is if these firms are flouting any norms of the foreign direct investment that they would have agreed on at the time of starting the business. Under the FDI rules, if the companies had obtained the government’s approval through the automatic route then they are only permitted to operate the B2B model and not directly sell to the customers. But the ecommerce giants use their financial muscle to rope in resellers on their platform to dell products, in this case mobile phones at discounted prices.
The association of mobile phone makers, which has the top players like Apple, Nokia, Lenovo and Micromax as members, has raised the complaint that these discounts are offered by Amazon and Flipkart not by the sellers, through an internal arrangement which does not fall under the norms.
These manufacturers are forced to take the issue to the government since the offline retail segment which sells their products through the millions of outlets across the country are finding it difficult to convince their customers on why they are unable to match the prices being offered by the online retailers. The ICA has pointed out that the situation has led to many offline mobile retailers closing shop rendering thousands jobless.
The ecommerce companies strongly deny any wrongdoing. Flipkart, on the other hand, is being asked to rework its accounting in its books of the discounts being taken as regular revenue expenses towards marketing and book them as long-term brand-building expenses. If the companies comply, they cannot be showing losses and escaping taxation. If they start paying tax on profits through this IT regulation, the whole discount scenario may change.
The last is not heard on this subject. Meanwhile, if you wish to capitalize on the online offers, grab it before it is withdrawn.