Discounts on mobile phone offered by online retail companies might be short-lived. Companies like Amazon and Flipkart, offering discounts on mobile phones sold on their platform either directly or indirectly, may be violating foreign direct investment rules.
Online retailers with foreign investment are circumventing rules, specified in a section called Press Note 3 on FDI, by holding inventory and influencing the prices of electronic goods, eroding offline retailers’ revenue, according to telecom industry association. Amazon has denied the allegations.
This is not the first face-off between offline and online retailers. Brick and mortar retailers have accused e-commerce platforms of providing steep discounts in the form price discounts, EMIs, exchange offers, cashbacks and financing costs.
Under Press Note 3, 100% FDI investment in e-commerce companies is allowed under the automatic route if the companies are engaged in business-to-business sales, not business-to-consumer transactions. So the e-commerce platforms are marketplaces which connect vendors with buyers.
Companies related to Amazon’s include Amazon Seller Services, Amazon Wholesale India Pvt., Amazon Pay, while those related to Flipkart include Flipkart Internet Pvt Ltd, Flipkart India Pvt Ltd, Ekart Logistics, PhonePe.