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CCI probes heavy discounts offered by e-commerce majors

Published: Aug 10, 2018

By TIOLCORPLAWS News Service

BENGALURU, AUG 10, 2018: The Competition Commission of India (CCI) has approved the Walmart's USD 16 bn acquisition of Flipkart but the antitrust regulator also expressed its observations on the discounting practices of Flipkart, that may trigger a regulatory probe of all online marketplaces that rely on discounts to attract customers.

CCI's order included an observation that Flipkart and other online retailers were discounting on their platforms—a practice that is explicitly banned. In March 2016, India allowed 100% foreign direct investment in online retail of goods and services under the “marketplace model” through the automatic route, but it banned online marketplaces from influencing product prices directly or indirectly.

On Thursday, Flipkart, Amazon and Paytm Mall were all running heavily-advertised sales on their platforms, offering discounts of more than 70% on their platforms on all kinds of products, including books, smartphones, televisions and clothing. These platforms say the discounts are offered by third-party sellers. However, the CCI used strong language to denounce the discounting practices and the supplier relationships of Flipkart in its order on Wednesday.

The CCI said in its order that the issues concerning FDI policy would need to be addressed in that policy space to ensure that online market platforms remain a true marketplace providing access to all retailers, referring to complaints by small traders against the deal. Small traders led by the Confederation of All India Traders had complained about discounting by Flipkart and preferential treatment to specified sellers on its marketplace, among other things.

The CCI further said that it was found that a small number of sellers in Flipkart's online marketplaces contributed to substantial sales. Almost all of those were customers of Flipkart in B2B (business-to-business) segment, and hence were common customers, availing significant discounts from Flipkart in both B2B segment as well as in the online marketplaces.

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