Deep discounting in e-commerce leads to gray market and results in losses to government exchequer: CAIT, AIMRA, ET BrandEquity

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The Competition Commission of India (CCI) should immediately halt operations of e-commerce companies Flipkart and Amazon as they engage in predatory pricing and burn cash to offer deep discounts on products, traders’ association CAIT and major mobile retailers’ association AIMRA said on Tuesday. These practices, in turn, create a gray market for mobile phones and cause losses to the state treasury “as gray market players evade taxes,” they said.

The Confederation of All India Traders (CAIT), in collaboration with the All India Mobile Retailers’ Association (AIMRA), has formulated the demands in a white paper on the impact of e-commerce giants Amazon and Flipkart on India’s retail ecosystem.

AIMRA called for Chinese mobile phone companies OnePlus, iQOO and Poco to halt operations over alleged collusion with e-commerce players.

The white paper alleged violations of foreign direct investment (FDI) guidelines and other regulatory frameworks by Flipkart and Amazon.

“They (Flipkart and Amazon) are heavily indulging in price gouging, deep discounting, loss financing etc. Whatever investments they make, they are used to burn cash and finance losses incurred by them while doing business in India,” it said BJP MP and CAIT said general secretary Praveen Khandelwal.

Addressing a summit organized by AIMRA, Khandelwal said, “It looks like there is a cartel between e-commerce players, the brands and the banks. They are working hand in hand to conquer the market through various means, but the big retailers will do it. We are not against e-commerce, but we want a level playing field and fair business operations.

The summit unanimously demanded that the CCI should “immediately stop the operations of Amazon and Flipkart and their related companies that are helping these two companies capture the market.”

When contacted, OnePlus declined to comment on the matter, while Flipkart, Amazon, Poco and iQOO did not provide an immediate response.

Kailash Lakhyani, founder and chairman of AIMRA, said some of the brands and banks are collaborating with e-commerce companies to provide deep discounts.

“Customers are not able to purchase mobile phones at heavily discounted prices as these are purchased on the gray market. These (grey market purchases) can be easily tracked with the help of IMEI…It is also a loss for the government as gray market participants evade taxes,” he said.

The operations of Chinese brands such as OnePlus, Poco and iQOO should be suspended for at least one to two years as they engage in commercial activities that do not add value to the Indian economy, Lakhyani added.

Major electronics brands like Samsung, Xiaomi and LG are offering aggressive discounts on their own online stores to clear unsold inventory. These offers often beat those offered by e-commerce giants Amazon and Flipkart. This strategy helps brands save on costs associated with offline retail and effectively liquidate inventory during the holiday season.

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