New Delhi (Sputnik) — A court in India has issued notices to e-commerce giants Amazon and Flipkart for violation of Foreign Direct Investment (FDI) norms. The apex court of Delhi issued the notices on a Public Interest Litigation (PIL) filed by a non-governmental organization (NGO).
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The PIL, filed by an NGO named Telecom Watchdog, alleges that both Flipkart and Amazon have been openly violating FDI norms for the marketplace model of e-commerce and circumventing them by routing hot-selling products at much cheaper rates through proxy "controlled sellers" or "name lenders" and in the process pushing out small sellers and brick-and-mortar retailers from the business.
The plaintiff has sought legal proceedings against the two companies under the Foreign Exchange Management Act (FEMA), according to the Economic Times.
As per Indian FDI norms, e-commerce companies like Amazon and Flipkart are not allowed to have ownership over the stock and can also not directly or indirectly influence the price of goods and services sold on their online marketplace; which effectively means that e-commerce firms can function as a marketplace to connect buyers and sellers, but cannot influence prices.
Earlier this year, the Indian Cellular Association (ICA) and Retailers Association of India (RIA) raised the same issue of violations of FDI rules by the online platforms.