Flipkart, coming off its biggest-ever flagship sale event, Big Billion Days, is currently facing increased government scrutiny along with arch rival Amazon. Days after the Department for Promotion of Industry and Internal Trade (DPIIT) sent across detailed questionnaires to the ecommerce majors following allegations of predatory pricing, Walmart CEO Doug McMillon has reached out to Prime Minister Narendra Modi on various issues ranging from licencing norms to a stable and open regulatory environment in India.
In his letter to Modi, McMillon sought certainty and predictability in India's business environment, sources in the know told The Economic Times. The new FDI norms for ecommerce, which kicked in soon after Walmart Inc shelled out $16 billion to acquire Flipkart, had come as a shock to the world's largest retailer. McMillon, who had met Modi in New York on September 25 during the PM's visit to the US, also highlighted Walmart's commitment to India, including investments to empower small and medium enterprises, plans for global sourcing from India and further job creation. It reportedly supports more than 1 lakh direct jobs in the country currently.
While lauding the government's efforts to improve India's ranking on ease of doing business, the Walmart CEO also urged the govt to reduce the high number of permits required for opening a store in India, the way it previously eased licencing norms for hotels, The Times of India reported. He pointed out that Walmart currently requires more than 45 permits and three years to open a new Best Price store in India.
McMillon's letter comes amid accusations of "unfair business practices" and violation of FDI norms levelled against Flipkart and Amazon by a national traders body. The Confederation of All India Traders (CAIT) recently claimed that the two behemoths had collectively generated total business worth Rs 19,000 crore in their four-day mega sales events earlier this month, effectively snatching festival trade courtesy predatory pricing and deep discounting.
On Thursday, commerce minister Piyush Goyal said that the government is probing Walmart-owned Flipkart and Amazon over CAIT's allegations, warning of stringent action against the etailers in case of any violations "in letter or spirit". He added that the ecommerce companies have no right to offer discounts or adopt predatory prices. "Selling products cheaper and resulting the retail sector to incur losses is not allowed," Goyal said.
The new FDI norms for ecommerce, announced by the government in December, bar online marketplaces with foreign investments from selling products of the companies where they hold stakes, and ban exclusive marketing arrangements. Hence, Amazon, which has an investment in Cloudtail, can no longer sell the latter's products on its platform, while Flipkart had to take down its private labels in the grocery category. Another clause states that the inventory of a vendor will be seen as controlled by a marketplace, if over 25% of the vendor's purchases are from the marketplace entity, including the latter's wholesale unit.
Both Amazon and Flipkart have maintained that they follow the current FDI policy. The companies also strongly deny having indulged in deep discounting, saying brands offer those discounts.
(With PTI inputs)