Deep discounting not part of ease of doing business, govt tells e-tailers

‘Deep’ discounting has been a constant complaint of traders and offline (traditional) selling entities
Being allowed predatory discounting and a conducive business environment are not the same thing, the government plans to make this clear to digital commerce entities. In the e-commerce policy it is preparing, this point will be underlined, said sources in the commerce ministry.

‘Deep’ discounting has been a constant complaint of traders and offline (traditional) selling entities. 

“E-commerce players keep saying that the business environment needs to improve; it should be more open, so that more foreign investment comes in. But when you do a deep dive, their main bone of contention is around the discounts and sales they hold, and the protests around it. These two things are completely different and in the e-commerce policy, we will make this clear. We, under no circumstances, will allow or condone predatory pricing,” said a senior in the ministry.

The policy is, after delays, likely to be ready only next year. The policy might not only limit the maximum discount on a product but also ensure the seller is giving it. “Under the policy guidelines, (e-com) platforms might have to a give detailed break-ups of the discount in the pricing details, to ensure e-commerce portals are not the ones financing it. Companies would even need to get yearly audits of discounts, done mandatorily by independent auditors, to ensure there was no predatory pricing,” said a senior official at the ministry.

Time and again, the government has made it clear that it wants to ensure offline retailers are not rooted out by major e-commerce firms. Online marketplaces, on their part, have always maintained that they were following all the guidelines around discounting and that it is the seller offering the discounts.    

Traditional traders have said they want early issue of the policy, with clarity on the issue of predatory pricing. 

“Policy is the domain of every country and if multinational corporations (the reference is to the Indian arms of Amazon and Wal-Mart) wish to carry on business, they are under obligation to follow the policy in letter and spirit. Before raising any voice on policy, these firms should realise that their business model across the globe is controversial and questionable,” said Praveen Khandelwal, secretary-general, Confederation of All India Traders (CAIT). 

E-marketplace firms periodically offer deep discounts. “Both Amazon and Flipkart (now part of WalMart) have continued to stress that discounts are provided by sellers, and that the e-marketplaces themselves have not directly or indirectly influenced them on the matter. But, we have received multiple representations from trader bodies like CAIT which say e-marketplaces continue to advertise mega sales during Diwali or New Year under their own brand name, not those of major sellers who are providing discounts," said a senior official who is looking at the matter.

As a result, the government might also speak to major sellers registered on the platforms, he added.

The initial draft of the proposed policy had suggested a sunset clause for predatory pricing that clearly spelt 'zero payment offers', 'flash sales' and 'unlimited offers' as strictly restricted. "It had also sought to define these practices and set fixed norms for each. Now, more than ever, there is a need for this,” says a senior official from the department for promotion of industry and internal trade.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel