Re:etail PDF Print E-mail
Wednesday, 06 November 2013 00:00
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Mom-n-pop stores complaining about etail means the latter is becoming a formidable force

Two points are worth keeping in mind when looking at the petition of a group of small brick and mortar stores who have written to the Competition Commission of India alleging India’s fledgling etail industry is hurting them by selling goods at below cost and is also violating India’s laws on FDI in retail. Though the Competition Commission is unlikely to deal with etailers violating FDI laws, it is worth keeping in mind the law has been designed such that it lends itself to ‘violation’. India doesn’t allow FDI in b2c transactions but allows it in b2b—so a loophole in the law allows etailers to bring in FDI through a circuitous route. You can blame the government for leaving a loophole in the law, you can’t blame etailers for exploiting it—in the same manner Press Note 2 legally allowed foreign retailers to hold an effective stake in Indian retailers while the law on FDI in retail disallowed this.

The larger question, in any case, has to be about etailing in general, not foreign etailers versus Indian etailers in quite the same manner that, if—and that’s a big if—the question has to be asked, it has to be about organised retail versus unorganised retail and not about organised Indian retail versus organised foreign retail. Logically, the Competition Commission has no option but to throw the case out since, by law, anti-competitive pricing requires market power. Merely selling at below cost—and even this has to be proved—is not a crime; it becomes actionable when the person doing so is a dominant player and so, by doing so, is preventing other firms from coming up. Given the size of the Indian retail market and the size of the etailers, this is far from being anywhere near true. The fact that kiranas, even if a small group of them, are beginning to feel the heat suggests etail has already begun to emerge as a force to reckon with. Imagine the irony: India continues to grapple with the issue of FDI in organised retail while the battleground has already shifted.


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