CAIT raises concerns on Flipkart-ABFRL deal

Our BureauNew Delhi, October 27 New Delhi | Updated on October 27, 2020

Flipkart’s stake acquisition was a preemptive move to gain the first right of refusal to stave off competition from other biggies

The Confederation of All India Traders (CAIT) on Tuesday raised concerns on Flipkart’s move to acquire 7.8 per cent stake in Aditya Birla Fashion and Retail Ltd (ABFRL) and alleged that the move is in violation of the the country’s Foreign Direct Investment (FDI) policy.

“The deal happening between the two is in complete violation of the revised FDI norms notified by the government in Press Note No.2 of 2018 of the FDI Policy. The policy barred any entity in which an e-commerce firm or its group companies have a stake from selling goods of the said Company, on their online platforms,” CAIT alleged in its statement.

The traders body has also written to the Commerce Minister Piyush Goyal on this issue.

Praveen Khandelwal, Secretary General, CAIT said, “In the stock exchange filings, a clear intent to make ABFRL a preferred seller on the marketplaces owned and operated by Flipkart Group is shown ,which strictly violates the policy of the government. The present FDI policy clearly prohibits a foreign company to venture in any forms of multi-brand retail trading ( MBRT) including through e-commerce by having any equity interests in the sellers on the market-platform, or directly/indirectly controlling their inventory through side agreements, or under the garb of B2B e-commerce.”

The traders body said that it appreciates the intention of the government spelled out in Press Note No 2, “...which reflects that to facilitate the adoption of new technology platforms by Indian retailers and to facilitate the technology led start-ups in the area of retail, a limited participation of foreign companies have been permitted by the way of FDI in e-commerce marketplace.”

“The FDI policy has made specific provisions under Para (v) of the Press Note 2 of 2018 to avoid any overlap and ensure that the foreign companies do not indulge in MBRT or controlling inventory by any means. Hence the purported action of Flipkart Group/ ABFRL is in complete violation of the letter and spirit of the FDI policy in the retail and e-commerce sector,” Khandelwal added.

Published on October 27, 2020

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