The Enforcement Directorate (ED) and RBI are set to examine India's top e-commerce platforms – Amazon, Flipkart and Snapdeal, to find out if they flouted FDI rules in the B2C (Business to Consumer) category, says a report from wire agency, PTI. The examination will happen under the directive of The Ministry of Commerce. The action was followed by a complaint from the Confederation of All India Traders (CAIT), which said that all three e-commerce portals sidestepped from the FDI rules and engaged in B2C activities while the law only allows for 100% FDI in B2B (Business to buisness) categories.
The complaint letter to DIPP Secretary, Amitabh Kant states, "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." This refers to the ADs taken out by the online shopping giants during their festive season sales this year.
Flipkart held a 5 day sale on its app last month and cashed in $300 mn in sales. Amazon and Snapdeal have also been holding Diwali sales for which full-page newspaper ads have been seen in prominent national dailies. The basis of CAIT's complaint is that neither Amazon, Flipkart or Snapdeal own their invetory hence they are not allowed to hold any sales or give any discounty in totality, as they are supposed to only be a marketplace and not retail outlets. As per the Consolidated FDI Policy Circular 2015, ecommerce refers to buying and selling activities on an ecommerce platform but such companies are only allowed to engage in B2B exchanges and not retal exchanges. But, in doing so, the companies have come under the ED's lense and are being probed at the moment.