- India introduced new rules in February for protecting small retailers
- Rules forced e-commerce firms to tweak their business structures
- Amazon and Flipkart say they’ve complied with the federal rules
The Indian government is looking into whether hefty discounts offered on Walmart-owned Flipkart and Amazon.com during their online festive sales violate foreign investment rules, a commerce ministry official told Reuters. India introduced new rules in February aimed at protecting the 130 million people dependent on small-scale retail by deterring big online discounts. The rules forced e-commerce firms to tweak their business structures and drew criticism from the United States, straining trade ties between New Delhi and Washington.
While Amazon and Flipkart say they’ve complied with the federal rules, local trader groups say the two companies are violating them by burning money to offer discounts – of more than 50 percent in some cases – during the ongoing festive sales.
Reuters reviewed emails and internal training material from Flipkart showing the company is in some cases offering to reduce, or forfeit, its sales commission from sellers that offer discounts.
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The commerce ministry official told Reuters the government was reviewing complaints and evidence filed by the Confederation of All India Traders (CAIT), a group representing some 70 million brick-and-mortar retailers, alleging Amazon and Flipkart were violating the foreign investment rules.
The official declined to comment on possible action, but executives from Amazon and Flipkart were summoned to meet commerce ministry officials last week to discuss the matter.
Flipkart in a statement said it had a “good meeting” with government officials and it was “deeply committed to doing business the right way in India”.