Plea on FDI violations by e-commerce giants:Delhi HC

New Delhi: The Delhi high court on Monday sought the stand of the Centre and Amazon and Flipkart on a PIL alleging that the e-commerce giants were violating foreign direct investment (FDI) norms.

A two-judge bench of Acting Chief Justice Gita Mittal and Justice C. Hari Shankar issued notice to the Centre, Amazon and Flipkart seeking their response by November 11 to the plea, which has sought a probe into the alleged FDI violations.

The petition by an NGO, Telecom Watchdog, has also asked for initiation of legal proceedings against the two e-commerce giants under the Foreign Exchange Management Act (FEMA) for alleged violation and circumvention of FDI. The petition, filed through lawyer  Pranav Sachdeva, has claimed that Amazon and Flipkart have created multiple entities to circumvent the FDI norms and route the hot-selling stock at cheaper rates.

The plea has contended that according to press note 3 of 2016, which regulates FDI in e-commerce, entities such as Amazon and Flipkart are not to exercise ownership over the stock, nor directly or indirectly influence price of goods and services sold on their marketplace.

The plea has claimed that Amazon and Flipkart buy branded goods in bulk at discounts from manufacturers and render small sellers uncompetitive by a wide margin, thus influencing prices in violation of FDI norms.

“As a consequence of this FDI norms violation, smaller sellers are unable to participate in the fast growing e-commerce sector,” the plea has contended and added that due to subsidized prices on such platforms, small sellers are unable to sell in the brick-n-mortar world too.

“The cumulative impact of this is that the marketplaces have usurped the space meant for small retailers by turning into proxy sellers via their name-lending companies,” the plea alleged.  Apart from that it also claimed the two e-commerce giants have created several other companies to divide discounts.