Amazon and Flipkart: Bullies or champs?
E-commerce companies Amazon and Walmart-owned Flipkart are to be probed for anti-trust behaviour on charges of deep discounting, exclusive product launches, preferential treatment of sellers, and the promotion of private labels, all of which are alleged to have distorted the playing field for several market players. The two e-tailers are under the scanner of the Competition Commission of India (CCI).
The probe follows a recently announced annual statutory audit of compliance with foreign direct investment (FDI) rules for online marketplaces. These forbid such platforms from holding stakes in sellers using their service and from exclusive product sale deals. Local traders allege that the two have violated the rules, which came into force last February, a charge that both have denied.
A CCI investigation would help clear the air on how the two big online marketplaces operate. While their share of India’s overall retail market is puny, their rapid growth suggests far greater dominance of the field ahead. Their inherent advantages of ease-of-use, lean distribution networks, low real-estate costs and cheap delivery labour apart, they have been suspected of a loss-leader strategy of burning cash to acquire shoppers. Whether their practices put smaller shops and sundry suppliers at an unfair disadvantage is a question that only close scrutiny can answer. Their success, it may turn out, may simply be attributable to innovation. As Amazon’s chief Jeff Bezos arrives in India on Wednesday, he is likely to face a barrage of questions. Whichever way the CCI cases go, it’s important that market competition does not suffer.
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