Kalyan Krishnamurthy, CEO of Flipkart has expressed that the e-commerce company is in full compliance with India’s FDI (Foreign direct investment) rules and is ready to face any audit to prove it.
The statement from Krishnamurthy comes after commerce and industry minister Piyush Goyal, reportedly, asked Flipkart to prove its compliance with the latest FDI norms for online marketplaces, put into place earlier this year.
Also, a high-profile meeting between Goyal and top e-commerce executives from India and international was held earlier this year.
Later, after the meeting, Krishnamurthy said that Flipkart was committed to complying with all government policies and takes legal compliance “seriously”. However, he declined to comment on the meeting.
He added that company’s statutory auditors are free to check for compliance with the e-commerce regulations.
Notified on December 26, the changes in e-commerce FDI policy target deep discounts being offered by large online marketplaces, Flipkart and Amazon, as putting a stop to e-commerce marketplaces dealing with exclusive vendor-partners.
The circular came into effect from February 1, 2019 after DPIIT refused to extend the deadline.
The rules state a vendor will be considered “controlled” by an online marketplace operator if it sources more than 25 per cent of its merchandise from an entity related to the e-commerce marketplace.
Since then, leading players Amazon and Flipkart have been examining ways to outgrow the rules to continue the deep discounts and partnerships with vendor partners.
Furthermore, Flipkart had appointed some companies as intermediaries between its wholesale unit and preferred sellers on its platform to work around the 25 per cent cap on direct purchases from entities related to marketplaces.
The intermediaries were tasked with buying merchandise from Flipkart’s wholesale arm and selling these to preferred sellers, to sell on to Flipkart users.
Conclusively, the trade unions and shopkeepers allegation that e-commerce marketplaces have detrimental effects on local retail place placed the rules in place.
They also alleged that the FDI-backed Flipkart and Amazon regularly indulge in predatory pricing and deep discounts to compete online, which leaves brick-and-mortar stores and other smaller online shopping companies at an disadvantage.