On Monday, a Delhi High Court bench, headed by Chief Justice Rajendra Menon, dismissed a public interest litigation that sought an enquiry against e-commerce firms Amazon India and Flipkart for breaching the country’s foreign direct investment norms, a report in The Economic Times stated.
The order was passed on the grounds that the Enforcement Directorate (ED) already had a case pending on these marketplaces under the provision of the Foreign Exchange Management Act (FEMA), the ET report stated.
The PIL was filed by a non-governmental organisation called Telecom Watchdog through advocate Pranav Sachdeva citing a violation of FDI norms laid down in Press Note 3 of March 2016, which prevents FDI in inventory-based models of e-commerce. The PIL said that Amazon and Flipkart had created multiple entities to bypass FDI norms and used these entities to source goods at wholesale rates, providing them an unfair price advantage over small sellers on the platform, the report stated.
Both Amazon and Flipkart did not respond to specific queries from TechCircle on the development at the time of publishing this report.
Press Note 3 restricts a single entity from accounting for more than 25% sales on a marketplace and for directly or indirectly influencing the inventory and pricing by the marketplaces. This was further strengthened by clarifications issued by the Department for Promotion of Industry and Internal Trade in December 2018 as part of Press Note 2.
The regulations which came into effect on 1 February this year saw Amazon India pull out its private label brands from the marketplace. It also restructured its shareholding in its largest seller Cloudtail India. Flipkart-owned fashion portal Myntra also denied owning stakes in sellers which retail its private labels.