CAIT Claims Quick Commerce Platforms Violate Competition Law and FDI Standards

Nitin Konde, Varun Bhardwaj

Nov 16, 2024 — 3 min read

CAIT Accuses Quick Commerce Platforms of Breaking FDI Norms

On 13 November, the Confederation of All India Traders (CAIT) accused rapid commerce platforms of breaking a number of national laws, such as the Competition Act, the Consumer Protection Act, and Foreign Direct Investment (FDI) regulations.

The trade group stated in a white paper that more than INR 54,000 crore in foreign direct investment (FDI) funds have been given to the nation's top three rapid commerce platforms: Zepto, Swiggy's Instamart, and Blinkit, which is owned by Zomato. Just INR 1,300 crore, or 2.5%, of this has gone towards the creation of tangible assets. According to the report, operating losses brought on by predatory pricing practices may have accounted for more than half of the foreign direct investment.

It further stated that this is against FDI standards, which were designed to promote long-term growth through the development of infrastructure and assets.

Since retail trade is a state matter, CAIT will distribute copies of this white paper to the Ministry of Consumer Affairs, the Competition Commission of India, and the chief ministers of every state, according to CAIT secretary general Praveen Khandelwal.

Ignoring FDI Norms

According to the CAIT's research, these platforms use a "closed nexus of preferred sellers," which is against the FDI standards and acts. The CAIT claimed that FDI regulations specifically forbid foreign-backed marketplaces from controlling or holding inventory.

Additionally, the trade group has asserted that these quick-commerce platforms restrict market access by predatory pricing, deep discounting, and exclusive agreements with specific suppliers, all of which are violations of the Competition Act. According to the report, they are driving small retailers and kirana shops out of the market by giving chosen vendors free or drastically reduced storage and delivery services.

CAIT claims that Blinkit uses five major vendors, including Superwell Comtrade, TAMS Global, and Kemexel Ecommerce. Among other companies, Swiggy Insatmart depends on PYD Retail, Bhagwati Stores, Getmax Globe, and FOCLO Technologies. As an inventory-based e-commerce company, Zepto, on the other hand, directly supplies products, completely avoiding third-party vendors.

Vertical Agreement With Preferred Players

According to the white paper, these platforms have vertical agreements with their favoured vendors, giving them complete control over price, distribution, storage, production, and supply. This restricts consumer options, affects purchase costs, and hinders independent sellers' access to the market. Furthermore, it asserts that the platforms are violating the Consumer Protection Act by not giving customers clear information about the merchants. According to the trade group, these activities are putting the livelihoods of 3 crore kirana shopkeepers in jeopardy and forcing over 25% of them to close.

The white paper was released at a time when regulators are looking more closely at platforms for quick commerce. The Food Safety & Standards Authority of India (FSSAI) requested on 12 November that operators of e-commerce and quick-commerce food businesses guarantee a minimum shelf life of 30% or 45 days prior to product expiration at the time of delivery to customers. The Central Consumer Protection Authority (CCPA) also sent notices to e-commerce and quick commerce companies last month for violating the Legal Metrology Packaged Commodity Rules (PCR) 2017 by failing to display the MRP and "best-before" dates for perishable goods on their platforms.