RBI Asked To Take Action Against Amazon, Flipkart For Violating FDI Policy

• The Confederation Of All India Traders (CAIT) has alleged that Amazon and Flipkart have been violating FDI and FEMA rules.
• DPIIT has asked the RBI and ED to take action against both the companies.
• In October, Amazon and Flipkart had received notice from the Consumer Affairs Ministry for not displaying 'Country of Origin' on their platforms.

The Department of Promotions of Industry and Internal Trade (DPIIT) has asked the Reserve Bank of India (RBI) and Enforcement Directorate (ED) to take action against e-commerce giants Amazon and Flipkart over violating Foreign Direct Investment (FDI) policy and Foreign Exchange Management Act (FEMA) rules.

On December 22, 2020, DPIIT had forwarded four complaints by the CAIT to the two agencies. The trader's body had alleged that e-commerce platforms violated the FDI policy and FEMA norms by adopting illegal structuring/investments and practices.

The trader's body has recently objected to the Rs 1,500 deal between Flipkart Group and Aditya Birla Fashion & Retail (ABFRL) due to the violation of FDI policy.

It alleged that through this deal, Flipkart was intended to make Aditya Birla Fashion & Retail (ABFRL) a preferred seller on their marketplace platforms such as Myntra and Flipkart.com.

As per the FDI Policy, The foreign company is prohibited to venture in any type of multi-brand retail trading (MBRT) by having equity interests in the sellers on its marketplace platform, or by controlling, directly or indirectly, their inventory through side agreements, or under the garb of B2B e-commerce, it said. 

Also Read: SEBI Imposes Rs 40 Crore Fine On RIL For Manipulative Trades In RPL

CAIT has accused both Amazon and Flipkart of exploiting loopholes in rules and frequently violating FDI policies relating to e-commerce by clandestinely offering discounts through sellers on their platforms, among others.

Meanwhile, Amazon and other e-commerce platforms have denied the charges and maintained that they abide by the relevant rules and policies.

Commenting on the case, Praveen Khandelwal, Secretary-General, CAIT, said that the body will make every possible effort to clean up the e-commerce landscape and an era of manipulation and exploitations.

The body will promote and encourage small traders across the country to adopt technology in their businesses to increase their growth, he said.

Commenting on the allegations by the trader's body,  a Flipkart spokesperson asserted, "The Flipkart group is fully compliant with all applicable laws and FDI regulations in the country."

Earlier in October 2020, E-commerce platforms such as Amazon and Flipkart had received notice from the Consumer Affairs Ministry for not displaying the 'country of origin' on their products pages, which is mandatory, according to the Legal Metrology (Packaged Commodities) Rules, 2011.

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