The Confederation of All India Traders (CAIT), representing over 8 crore retailers across India, has raised serious concerns about the business practices of quick-commerce platforms, including Blinkit, Swiggy Instamart, and Zepto. Citing violations of multiple regulatory frameworks, CAIT is calling for a comprehensive probe into these companies’ operational models. According to a detailed 24-page white paper released by CAIT, these platforms have amassed a Foreign Direct Investment (FDI) of over Rs 54,000 crore, yet only a fraction has gone toward building long-term infrastructure and assets.
Alleged FDI Violations in Quick Commerce Industry
In the white paper, CAIT argues that a large portion of this FDI—over 50%—may have been funneled to cover operational losses, which stands in stark contrast to the purpose of FDI, which is intended for infrastructure development and asset creation. According to CAIT’s report, only Rs 1,300 crore (approximately 2.5% of the FDI) has been directed toward infrastructure, leaving a large question mark over the remaining funds.
Key Concerns Highlighted by CAIT:
- Use of Funds: A major portion of FDI has reportedly gone to cover operating losses rather than asset creation.
- Contravention of FDI Rules: Quick-commerce platforms are allegedly using foreign-backed investments to indirectly control inventory through preferred sellers, which is restricted under Indian FDI policy.
- Lack of Infrastructure: Infrastructure investment from FDI remains limited, affecting long-term sustainable growth.
Dark Stores and Preferred Sellers: Violations of FDI Policy?
CAIT’s report details how these quick-commerce firms use “dark stores,” small warehouses strategically located to fulfill rapid delivery orders. While these companies claim to operate through third-party sellers, CAIT points out that the platforms maintain control over inventory through a network of preferred sellers, violating FDI norms that prohibit foreign-owned entities from exercising control over inventory in e-commerce operations.
These violations, according to CAIT, not only breach the FDI rules but also distort the competitive landscape by offering undue advantages to select sellers.
Competition Act Violations: Restricting Market Access and Predatory Pricing
Practices Harmful to Traditional Retailers
One of the most concerning aspects for CAIT is the alleged anti-competitive behavior exhibited by these platforms, which includes:
- Market Access Restrictions: Platforms create exclusive arrangements with a few sellers, limiting opportunities for a broader market.
- Deep Discounts and Predatory Pricing: Offering products at significant discounts, often below cost price, to drive traffic and increase market share, impacting traditional retailers’ ability to compete.
- Heavily Discounted Services: Free or significantly reduced warehousing and delivery services provided to preferred sellers, effectively cutting operational costs for these vendors alone.
The impact on traditional retail has been devastating, with CAIT estimating that around 2 lakh neighborhood stores have shuttered due to these competitive pressures. The organization warns that the long-term effects on India’s retail ecosystem could be severe if these practices go unchecked.
CAIT’s Push for Regulatory Intervention
CAIT Secretary General Praveen Khandelwal announced plans to submit the white paper to key government bodies, including the Competition Commission of India (CCI) and the Ministry of Consumer Affairs, as well as state governments. CAIT’s objective is to encourage a broadened investigation that could lead to stricter regulations on the quick-commerce model, preventing further erosion of India’s traditional retail structure.
Past Investigations as a Precedent
This is not the first time CAIT has raised the alarm over anticompetitive practices in the e-commerce space. Earlier, an investigation was conducted by the CCI following complaints that Amazon and Flipkart, owned by Walmart, were violating antitrust laws through similar exclusive seller arrangements and predatory pricing practices. CAIT hopes that a similar probe into the quick-commerce segment will prompt a regulatory response.
Growing Criticism From Other Trade Bodies
The quick-commerce industry has drawn fire from more than just CAIT. The All India Consumer Products Distributors Federation recently filed a complaint with the commerce ministry and the Department for Promotion of Industry and Internal Trade (DPIIT) highlighting similar issues. As these trade bodies rally for greater scrutiny, the government’s response could set a significant precedent for the industry’s regulatory landscape.
Compliance Issues: Violations of Food Safety Regulations
Further adding to the criticism, CAIT highlighted that these quick-commerce platforms often violate Food Safety & Standards Authority of India (FSSAI) regulations. As per the Food Safety and Standards Amendment Regulations of 2020, platforms are required to list food items only if they have at least 45 days remaining or 30% of their shelf life left at the time of delivery. However, reports indicate these guidelines are not consistently met, putting consumers at potential risk.
Compliance Violations Include:
- Failure to Meet Shelf-Life Requirements: Products are often sold with insufficient remaining shelf life.
- Lack of Transparency in Labelling: Non-compliance with FSSAI’s Labelling and Display Regulations.
Moving Forward: What CAIT Expects
CAIT’s call for regulatory action underscores a growing sentiment among traditional retailers who feel increasingly marginalized by foreign-funded, technology-driven competitors. The confederation’s demands are clear:
- A Broader Investigation: CAIT wants government agencies to delve deeply into these platforms’ business practices and FDI usage.
- Stricter Enforcement of FDI Rules: Ensuring that FDI guidelines are enforced, particularly around inventory control.
- Greater Accountability for Quick-Commerce Firms: Imposing accountability measures to protect both consumers and traditional retailers from unfair practices.
Infographic: Breakdown of FDI Utilization in Quick-Commerce Platforms
| Category | Amount (in Rs Crore) | Percentage of Total FDI |
|---|---|---|
| Infrastructure Development | 1,300 | 2.5% |
| Operating Expenses (Estimated) | 27,000 | 50% |
| Marketing and Promotion | 10,800 | 20% |
| Miscellaneous Expenditures | 14,900 | 27.5% |
This table highlights the minimal investment in infrastructure development compared to other expenses, raising questions about the long-term sustainability of the quick-commerce model.
Conclusion: The Road Ahead for Quick-Commerce in India
CAIT’s strong stance against quick-commerce platforms emphasizes the need for stricter regulations, especially regarding foreign direct investment usage and anti-competitive practices. As the CCI and other government agencies evaluate these concerns, the future of quick commerce in India may hinge on finding a balance between innovation and the interests of traditional retailers.
For now, all eyes are on how India’s regulatory bodies respond to CAIT’s demands. Will quick-commerce firms be held accountable, or will the sector continue to grow at the expense of traditional retail? Only time will tell, but CAIT’s push for a probe has certainly added fuel to the debate.
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