Commerce and industry minister Piyush Goyal had a meeting with the Amazon India Head on November 5 and figured out that the issues of Predatory Pricing are increasing in India.
Thereafter, he has warned all the e-commerce company or online marketing companies to stop the violation of the FDI policy, i.e., to halt predatory pricing on their website or the platform from where they are selling their products.
The issues of Predatory Pricing are not India specific as Amazon is facing the issue of antitrust probes in the EU and the U.S. One of the major areas of concern in U.S. is whether Amazon is having an Unfair Advantage over the third-party merchants in a situation when Amazon is selling the similar products on their platform.
What is Predatory Pricing?
Predatory pricing means setting the price of the product at such a low rate that it creates a barrier for other market players. This is done with an intention to eliminate competition from the market and have a dominant position in marketing, and it continues for an extended period of time.
Under the Competition Act, 2002 person who is entering into such practice is held to violate the laws of the country and are abusing their dominant position.
Last year, The Competition Commission of India in its ruling held that the Amazon and Flipkart are not violating Section 4 of the Competition Act, i.e., they are not having a dominant position in the online marketing and are not entering into any anti-competitive practice,
Government Response to the Issue of Predatory Pricing
There have been various instances of FDI violation by E-commerce companies. The Department for Promotion of Industry and Internal Trade (DPIIT) is looking for all such instance where the policy was violated. They have done a various meeting with the online market players, street-side stores and other local groceries who have time and again complained about the issue of Predatory Pricing and how it is affecting their business.
DPIIT had in the month of October asked Flipkart and Amazon to provide a detailed list of their top 5 sellers after the local and street vendor complained about the violation of FDI rules in their platform.
Further, they also asked the marketplaces to provide the details of the business done by their top 5 sellers, their commission and investment agreement with vendors and sellers and the details of association with any payment gateway.
Even the Confederation of All India Traders (CAIT) has time and again complied about the anti-competitive practice of the e-commerce companies and violation of FDI rules during the festive seasons. The Secretary-General of CAIT has in his statement on Thursday said that “Their business model is based on misplaced logic, funding negative cash flow through investors and monopolizing the market”.
The government has taken the cognizance of the issue of retailers and will surely be addressing their compliant but will avoid any knee-jerk response to the issue in hand.