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CAIT urges DPIIT to penalise Amazon, Flipkart for alleged violations
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SME Times News Bureau | 22 Nov, 2020
The Confederation of All India Traders (CAIT) has written to the
Department for Promotion of Industry and Internal Trade (DPIIT) to take
action against e-commerce major Amazon and Flipkart for alleged
violation of FDI and FEMA norms.
In a letter to the DPIIT
Secretary, Guruprasad Mohapatra, the traders' body said: "Our
association has been requesting your good office to take appropriate
steps and investigate, punish and penalize the multinational companies
like Amazon and Flipkart (owned by foreign multinational company
'Walmart', interchangeably used hereinafter) for the blatant violation
and/or by exploitation of the loopholes of the FDI policy and Foreign
Exchange Management Act."
It said the traders' body has been
examining various public statements and documents pertaining to the
investments made by both Amazon and Walmart and it has come to light
that both these companies have been conducting their activities in
blatant violation of Foreign Exchange Management (Non-debt Instruments)
Rules, 2019 (FEMA Rules).
It said that the the latest revelation
by Amazon during the arbitration proceedings at an arbitration court in
Singapore clearly shows its control over Future Retail.
"Amazon
has equivocally claimed that it has absolute control over FRL through
the shareholder agreement between Amazon and Future Coupons Private
Limited," it said.
"While FCL has only 9.2 per cent equity
participation in FRL, but by the way of shareholder agreement between
Amazon and FCL, it has full control over FRL," it alleged.
CAIT also told DPIIT that Amazon indirectly invested around Rs 4,200 crore and took over control of More Retail Limited.
It
also made allegations against Flipkart and said that it has on numerous
occasions, brought to the notice of the authorities about the operation
of inventory-based model of e-commerce, that is prohibited to foreign
companies, by Flipkart.
"Flipkart has been controlling the
inventories of the goods and services being sold on its eCommerce
marketplace platform operated by its e-commerce marketplace entity named
Flipkart internet services Limited. Such control is exercised through
sale of goods and services through its affiliate companies, such as WS
retail, Omnitech retail etc," it said.
By this way, Flipkart has been in blatant violation of FDI policy and FEMA rules, according to CAIT.
It
further said that Amazon also is operating an inventory-based model of
e-commerce that is prohibited to them being a foreign company.
"In
view of the facts and blatant violations set out hereinabove, it is
requested that your good office should promptly penalize both Amazon and
Flipkart for the various violations and offences under the Foreign
Exchange Management Act, 1999 and the rules/regulations framed
thereunder," it said.
"Applying Section 13 of the Foreign
Exchange Management Act, 1999, the monetary penalty at three times the
investments that are in contravention, Amazon will be liable for a
penalty amounting to over Rs 1,20,000 crores and Flipkart will be liable
for a penalty amounting to over Rs 3.8 lakh crores."
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