Online retailers flout FDI norms, consumers should consider who benefits from their purchases: Goyal

The minister said the deep pockets of companies like Amazon help small businesses and retailers engage in predatory pricing and use algorithms to influence consumer choices and preferences

Bombay: Continuing to express concerns over e-commerce players such as Amazon, Commerce Minister Piyush Goyal on Friday accused online sellers of not “fully” complying with the country’s foreign direct investment rules.

The minister added a new dimension to the debate, saying consumers should “think about” who benefits from their purchases and learn from the debate he started.

Speaking to reporters after addressing a meeting of chartered accountants, Goyal said Indian law states that only business-to-business transactions for foreign e-commerce entities are allowed in the country.

“Unfortunately, the law is not being fully implemented in letter and spirit… structures have been created which are detrimental to the interests of small traders and retailers,” Goyal said.

The minister said the deep pockets of companies like Amazon help them engage in predatory pricing and use algorithms to influence consumer choices and preferences.

He added that India “cannot afford” problems such as the disappearance of small shops and pharmacies, in the same way they have disappeared in developed countries like America and Europe, emphasising that there are millions of small traders.

However, he reiterated that the government supports the development of technology in the country and every industry has the right to promote its activities.

“E-commerce is playing an important role, as are small retailers,” he said, adding that the consumer will be the ultimate arbiter.

“I think even consumers are going to have to get behind it… They’re going to have to think about when they make purchases through any medium, who benefits,” he urged.

Goyal cited the example of local mobile phone repair shops, saying they have been forced out of the market by big mobile phone brands that force consumers to buy only new phones.

Goyal said e-commerce companies will resort to predatory pricing to grab market share and gain popularity, and warned that cheaper purchases today will force consumers to buy the same goods at a higher price in the future if small traders abandon trading.

The minister sparked a debate on Wednesday, raising concerns about the survival of small shops in the country in the face of predatory pricing, and warning of social disruption as more people lose their jobs.

On Thursday, he added that the government is not against e-commerce entities, but wants them to act honestly and fairly.

The minister questioned Amazon’s claim of a $1 billion investment in India, saying the US retailer was not doing any great favour to the Indian economy and was merely compensating for the losses it incurred in the country.

He said their huge losses in India “smack of predatory pricing” which is not good for the country as it hits millions of small retailers.

Goyal, a chartered accountant, on Wednesday slammed e-commerce firms, questioning their business model that adversely affects small retailers in the country.

“When Amazon says we’re going to invest a billion dollars in India and we’re all celebrating, we forget the hidden story that the billions of dollars aren’t going to great services or some great investment that’s going to support the Indian economy. They had a billion-dollar loss on their balance sheet this year, they had to make up for it.

“And how this loss was created, they paid Rs 1,000 crores to professionals. I don’t know who these professionals are… I would like to know which chartered accountants, professionals or lawyers are getting Rs 1,000 crores, unless you are paying all the best lawyers to lock them up so that no one can fight you in the case,” the minister said.

On Thursday, he said the government wants to support online businesses and is in favor of such entities, which offer “huge benefits” such as speed and convenience.