The Confederation of All IIndia Traders (CAIT) has today filed a writ petition before the Hon’ble Delhi High Court today praying that a direction be issued to Enforcement Directorate (ED) to investigate the activities of Flipkart.
CAIT has prayed that the ED has taken no steps with respect to the compliant which was filed by CAIT stating that the operations of Flipkart are in consonance with the FDI policy. CAIT has also relied on the recent observations made by the CCI that there must be legal and policy intervention to ensure that the activities of e-commerce players are within the ambit of FDI policy. It is thus mentioned that
1. Flipkart in the guise of operating under a marketplace model is also actively engaged in the inventory-based model of e-commerce. Their own admission before a tax authority shows that Flipkart is engaging in buying of goods which are ultimately sold on their platform. Flipkart tried to circumvent the law by routing the sales via their preferred sellers, who are their affiliates. It is a clear case of what they cannot do directly, they are doing it indirectly and this goes against the teeth of any law, including FDI policy and as such, Flipkart should liable as such.
2. Flipkart has consistently acted in violation of 25% norms condition by ensuring that close to 80% of the sales on its platform has taken place through its preferred sellers. This fact has also been acknowledged by the CCI.
3. E-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain level playing field. Flipkart has actively flouted this norm. Flipkart has actively engaged in Big Billion Day Sales, Diwali Sales etc., wherein it has directly influenced the sales prices of goods. This fact has also been acknowledged by CCI as well as tax authority.
4. Flipkart is known to preferential treatment to a few seller entities and thus enabling steep discounts on its platform and thus, not maintaining a level playing field and thus acting in violation of the FDI policy.
5. Flipkart has launched various private labels under its own brand that finds itself favourably placed due to deep discounts. Flipkart is the market leader for share of smartphone sales over online portals and the availability of its private label smart phone (Billion Capture and Billion Capture +) only through preferred seller and it does not provide other sellers to operate in this area of high demand.
6. Flipkart purchases goods and sells at discounted prices, while incurring a loss, to few preferential sellers, which are further sold on the its platform.
7. Further, the platform fee charged to normal sellers and preferential sellers are also different, and that preferential sellers get a discount.