ED searches 'preferred' vendors of Amazon, Flipkart in FEMA probe

The Enforcement Directorate Thursday conducted searches against some of the main vendors operating on platforms of ecommerce giants Amazon and Flipkart as part of a foreign direct investment violation investigation official sources saidA total of 19 premises of these preferred vendors located in Delhi Gurugram and Panchkula Haryana Hyderabad Telangana and Bengaluru Karnataka were covered as part of the action the sources saidIt is learnt that the ED inspected documents and took copies of some from the premises of about six such vendors who were not namedThe sources said a probe has been initiated by the federal agency under the provisions of the Foreign Exchange Management Act FEMA after it received several complaints against the two large ecommerce companies where it is alleged that they were violating Indias FDI foreign direct investment rules by directly or indirectly influencing the sale price of goods or services and not providing level playing field for all the vendorsThere was no immediate response from the two ecommerce companiesThe Confederation of All India Traders CAIT welcomed the ED actionThe CAIT along with several other trade bodies has been raising these issues for the past few years I welcome the Enforcement Directorates actions as a step in the right direction CAIT secretary general and BJP MP from Delhi Praveen Khandelwal said in a statementHe claimed that the Competition Commission of India CCI had also issued penalty notices to Amazon and Flipkart and their preferred sellers for engaging in anticompetitive practices that have adversely affected small traders and kirana grocery storesAs per existing rules 100 per cent FDI is allowed through automatic route in the marketplace model of ecommerce But overseas investment is not permitted in an inventorybased modelIn the market place model ecommerce entities can only provide a platform for thirdparty sellers and they cannot own the inventory They also cannot directly or indirectly influence the price of the goodsIt has been reported in the past that the CCI which works to ensure fair business practices across sectors in the marketplace is already looking into alleged anticompetitive ways of ecommerce companiesThe CAIT and mainline mobile retailers association AIMRA had also petitioned the CCI sometime back seeking immediate suspension of operations of Flipkart and Amazon as they alleged that the companies engaged in predatory pricing and were burning cash to offer heavy discounts on products These practices in turn are creating a grey market of mobile phones causing losses to the exchequer as players in the grey market evade taxes they had saidCommerce and Industry Minister Piyush Goyal had recently flagged the same concerns as he had questioned Amazons announcement of USD 1 billion investment in India saying the US retailer was not doing any great service to the Indian economy but filling up for the losses it had suffered in the countryHe had said in August that their huge losses in India smells of predatory pricing which is not good for the country as it impacts crores of small retailersGoyal said ecommerce companies were eating into the small retailers highvalue highmargin products that are the only items through which the momandpop stores surviveThe minister had said that with the fastgrowing online retailing in the country are we going to cause huge social disruption with this massive growth of ecommerceKhandelwal said that the CAIT has urged the CCI and the ED to protect the businesses of small tradersIn the new Bharat led by Prime Minister Narendra Modi Ji no one is above the law I am hopeful that now the law will take its rightful course and protect the livelihoods of small shopkeepersThis government is committed to ensuring that no entity can harm the trading community In response to multiple complaints filed by the trading community regarding FDI violations and the anticompetitive practices of quickcommerce companies such as Blinkit Swiggy and Zepto we urge both the CCI and the ED to take swift action and prevent any further irreparable damage to the businesses of small traders he said in the statementThis story has been sourced from a third party syndicated feed agencies Midday accepts no responsibility or liability for its dependability trustworthiness reliability and data of the text Midday managementmiddaycom reserves the sole right to alter delete or remove without notice the content in its absolute discretion for any reason whatsoever