RBI, ED asked to take ‘necessary action’ on FDI rule breach allegations against e-tailers

Updated : January 01, 2021 06:26 PM IST

Commerce Ministry has asked the RBI and ED to take “necessary action” on allegations made by CAIT, against Amazon, Flipkart and Walmart.

The Ministry for Commerce and Industry has asked the Reserve Bank of India (RBI) and the Enforcement Directorate (ED) to take “necessary action” on allegations made by the Confederation of All India Traders (CAIT), against Amazon, Flipkart and Walmart.

In its representations to ministry, CAIT mentioned that e-commerce companies were violating Foreign Exchange Management (FEMA)/ FDI rules by adopting the illegal structuring/investments and practices.

In a letter to RBI and ED on December 22, Mira Sethi, a deputy director with the department for the promotion of industry and internal trade (DPIIT), said: “The undersigned is directed to forward herewith the following representations received from the Confederation of All India Traders (CAIT) wherein it has been, inter-alia, alleged that e-commerce companies are in violation of Fema rules/FDI policy by adopting the illegal structuring/investments and practices,” said a report in the Financial Express.

In its representations to the government, CAIT has objected to the Flipkart Group’s purchase of a 7.7 percent stake in Aditya Birla Fashion & Retail (ABFRL) for Rs 1500 crore, citing breach of the FDI policy.

According to the Financial Express report, CAIT is of the view that the Flipkart Group, which operates e-commerce platforms such as Flipkart and Myntra, has a “clear intent to make ABFRL a preferred seller” on their marketplace platforms.

The FDI policy prohibits foreign companies from any form of multi-brand retail trading (MBRT) through equity stakes in the sellers on its marketplace platform. Also, foreign companies cannot directly or indirectly, control the inventories of sellers through side agreements.

The traders’ body has also alleged misuse of the FDI policy in manufacturing by e-commerce players for multi-brand retailing of grocery. It has accused both Amazon and Walmart-backed Flipkart of exploiting loopholes in rules and unfairly offering discounts through sellers on their platforms, among others. The e-commerce players have denied the charges and maintained that they abide by the relevant rules.

Commenting on the allegations, a Flipkart spokesperson told Financial Express: “The Flipkart group is fully compliant with all applicable laws and FDI regulations in the country…Through our pan-India operations and deep investments in supply chain, physical & digital infrastructure, we create lakhs of direct and indirect employment opportunities and nurture entrepreneurs across the country.”

Published : January 01, 2021 05:59 PM IST

RBI, ED asked to take ‘necessary action’ on FDI rule breach allegations against e-tailers

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