[Dry Ice]

Originally Posted by binand

This is getting weirder and weirder:
http://ibnlive.in.com/news/ed-issues.../506038-7.html
I don't understand what law did FK break, specifically. Having a PR disaster is not illegal, is it?

I know! This is lobby groups at work, nothing else.

[binand]

Originally Posted by blacksport

No matter whether Flipkart has violated any law, but they are going to pay up to get rid of the hassle. It just means that Ms Sitaraman is going to get richer.

You reckon Ms. Sitharaman has a pecuniary interest in the matter? I find that ludicrous.

As for the "Rs. 1000 crore fine", I would really like to know where this number came from - ED or the CNN-IBN reporter's imagination?

[bond_bhai]

Moto 360 is available and Instock. If you are interested, head over to Flipkart - http://www.flipkart.com/motorola-mot...1=16CL1Xforums

[akshaymahajan]

I dont know about the legalities

But selling items at a huge loss to gain market share, increase evaluations or as a marketing gimmick because you have a bunch of venture capitalists behind you isnt really fair. The govt needs to curb this to a certain extent.

So I think the FK hungama is spot on.

[msdivy]

Originally Posted by akshaymahajan

The govt needs to curb this to a certain extent.

Well, Flipkart issue comes under Competition Commission of India (CCI), whose aim is to ensure fair and healthy competition in the markets. But why Enforcement Directorate (ED) is interested here is mystery.

[akshaymahajan]

Originally Posted by msdivy

Well, Flipkart issue comes under Competition Commission of India (CCI), whose aim is to ensure fair and healthy competition in the markets. But why Enforcement Directorate (ED) is interested here is mystery.

Apologies. My bad. Not so good with all the departments involved.

[sourabhzen]

Originally Posted by akshaymahajan

I dont know about the legalities

But selling items at a huge loss to gain market share, increase evaluations or as a marketing gimmick because you have a bunch of venture capitalists behind you isnt really fair. The govt needs to curb this to a certain extent.

So I think the FK hungama is spot on.

What would they gain by gaining market share? I may buy a discounted item from them but who on earth will force me to buy overpriced item in future when they have the market share? Moreover, the products are sold at MAXIMUM retail price, no one ever mentioned 'minimum' retail price on their product. Government shall be interested in VAT or other taxes only. The full tax amount must be paid to government irrespective of the price it is sold. For example, government shall get full tax amount even if FK is giving an item for free.

I may be wrong here but I think FK is not monopolizing anything and is not forcing anyone to buy a particular product from them.

[binand]

Originally Posted by akshaymahajan

But selling items at a huge loss to gain market share, increase evaluations or as a marketing gimmick because you have a bunch of venture capitalists behind you isnt really fair. The govt needs to curb this to a certain extent.

Quite funny you say that, since that's exactly what the government does (remember Essar and Reliance etc. tried running petrol pumps and couldn't compete with government-subsidized pumps' prices?).

Anyway, price undercutting is a legitimate practice in all spheres of business - nothing unfair about it. It is usually not sustainable, so the incumbents just out-wait the newcomer. They don't go screaming "Mummy!" to the government. :-) Is there anything stopping from the rest of the players from doing the same thing?

Originally Posted by msdivy

Well, Flipkart issue comes under Competition Commission of India (CCI), whose aim is to ensure fair and healthy competition in the markets. But why Enforcement Directorate (ED) is interested here is mystery.

CCI has a phrase, "abuse of dominant position". It will be a challenge to anyone who complaints against Flipkart to prove that they have a dominant position in any market.

[blacksport]

I find it funny that some people, on one hand claim that the whole discount thing was an eyewash (that such items did not exist at all) and on the other hand claim that Flipkart is able to provide "discounts" since they got VC funds recently. First they have to decide whether the discounts were real or not. They can't claim it both ways.

[akshaymahajan]

The discounts were real. There may have been only a handful of products sold under each category but I have read online that people did get really good deals. All the others who couldnt score deals are probably doubting it like like what happened with the Mi3's.

What the government does is a totally different ball game. Because its the government and digging into this topic will open a can of worms. And i dont think I have enough knowledge on that topic to talk about it.

Again like I said, i don't know the legalities or the technicalities. Undercutting profits is a fair game. Totally acceptable. Selling products cheaper than what it cost the manufacturer is not. That's killing the competition. You make the other retailers bleed to death until you have the monopoly. Then before its too late, you sell out for a couple hundred billion. So even if you wrote off 20% of that in the form of 'discounts' you still make money at the end of the day. That's what I make of this. And I make be way off. And apologies for that.

[blacksport]

Originally Posted by akshaymahajan

The discounts were real. There may have been only a handful of products sold under each category but I have read online that people did get really good deals. All the others who couldnt score deals are probably doubting it like like what happened with the Mi3's.

What the government does is a totally different ball game. Because its the government and digging into this topic will open a can of worms. And i dont think I have enough knowledge on that topic to talk about it.

Again like I said, i don't know the legalities or the technicalities. Undercutting profits is a fair game. Totally acceptable. Selling products cheaper than what it cost the manufacturer is not. That's killing the competition. You make the other retailers bleed to death until you have the monopoly. Then before its too late, you sell out for a couple hundred billion. So even if you wrote off 20% of that in the form of 'discounts' you still make money at the end of the day. That's what I make of this. And I make be way off. And apologies for that.

OK, that is a fair assessment, but I think that we have to look at the spirit of the law than the letter. The law is there to prevent some company producing a commodity and then selling at a price lower than the cost to manufacture it. This kills competition since others are not able to match that price.

In the current case, it is hardly that what has happened. The discount was only for a limited quantity of items, just to attract traffic. They are not selling all Lumia 520s for 900 rupees all throughout the year. The discount lasted for just a few minutes for probably 100 pieces. That does not kill any competition. The offline retailers are just irked that Flipkart is eating into their profits. Seriously, I don't see the possibility of any online retailer killing any competition by organizing an one day discount sale.

In fact, it is the offline retail giants that are trying to kill off new competition by complaining to the government.

[kiku007]

From what I can understand from the below link, the ED notice/case has nothing to do with the Big Billion Sale. It's related to FDI in Multibrand B2C retail.

http://indianexpress.com/article/bus...r-fine-likely/

1000 or 1400 Crore seems to be an imaginary number used to garner attention.

On another note, if at all Competition Commission issues an notice to Flipkart, it'll be interesting to see the REAL numbers behind the Big Billion Sale.

IF the sale was real (i.e lots of below cost price to a good number of people), they could end up with a fine for trying to misuse market position. IF they just sold couple of hundred products below cost, then there's a whole world of people waiting to tare them apart in the Social network not to mention that, they could still be tried for misleading public.

Either ways, they are in the dock. Flipkart as a brand was doing very well. This whole discount fiasco was not needed. Probably they should have been careful with the parent FK brand and tested the discount sale with the Myntra brand.

But then, any publicity is good. Look at the sheer number of coverage they got

[msdivy]

Originally Posted by blacksport

In fact, it is the offline retail giants that are trying to kill off new competition by complaining to the government.

The offline giants aren't saints either. Big Bazaar celebrate Re 1 margin sale every year. They have weekly Wednesdays sale, Sabse sasta din (Replublic Day) sale. Reliance fresh usually price vegetables Rs 2 less than the wholesale market.

Originally Posted by kiku007

But then, any publicity is good. Look at the sheer number of coverage they got

This year they secured investment. So far so good, but the business is very risky. There are plenty of instances of failures (like Indiaplaza), where when the VCs left, the company collapsed.

[binand]

Originally Posted by akshaymahajan

Selling products cheaper than what it cost the manufacturer is not. That's killing the competition.

That is a facile argument. Suppose the manufacturer has set up a factory at a huge cost. Which means that in the initial few years he will definitely be selling below cost. So a rule like what you suggest will discourage setting up of factories.

Originally Posted by blacksport

The law is there to prevent some company producing a commodity and then selling at a price lower than the cost to manufacture it. This kills competition since others are not able to match that price.

It doesn't, in most cases. That model is not sustainable and generally you are allowed to bleed yourself to death. The competition can simply out-wait you (remember Air Deccan?) or match your price raising money just the way you have been. Mostly marketeers find that customers thus acquired are rather fickle, greatly increasing future costs for the company.

The only case where a regulator gets involved is when you have a dominant position - that is, when you are the only one satisfying the demand for a large majority of the consumers.

Originally Posted by kiku007

Either ways, they are in the dock. Flipkart as a brand was doing very well. This whole discount fiasco was not needed. Probably they should have been careful with the parent FK brand and tested the discount sale with the Myntra brand.

They are now doing it with the Myntra brand. I saw full page ad on today's Hindu that a sale is coming up.

Originally Posted by kiku007

From what I can understand from the below link, the ED notice/case has nothing to do with the Big Billion Sale. It's related to FDI in Multibrand B2C retail.

So this is the old FDI violation case that has come to bite them now. Nothing to do with the Big Bang Billion Brawl. Phew.

[Kumar R]

Originally Posted by akshaymahajan

Undercutting profits is a fair game. Totally acceptable. Selling products cheaper than what it cost the manufacturer is not. That's killing the competition. You make the other retailers bleed to death until you have the monopoly. Then before its too late, you sell out for a couple hundred billion. So even if you wrote off 20% of that in the form of 'discounts' you still make money at the end of the day.

Originally Posted by msdivy

Well, Flipkart issue comes under Competition Commission of India (CCI), whose aim is to ensure fair and healthy competition in the markets. But why Enforcement Directorate (ED) is interested here is mystery.

Originally Posted by kiku007

On another note, if at all Competition Commission issues an notice to Flipkart, it'll be interesting to see the REAL numbers behind the Big Billion Sale.

IF the sale was real (i.e lots of below cost price to a good number of people), they could end up with a fine for trying to misuse market position.

Flipkart can only be investigated by the CCI if can be established that: (1) it is a seller of goods (say through WS retail) and not merely a marketplace; (2) as a seller it is in a dominant position in the market (which could well mean the online + offline market for a particular product; and (3) it is selling that product at a predatory price as defined in the Competition Act.

Apart from (1) none of the others is likely to be true and understandably this issue is completely moot as reported in http://timesofindia.indiatimes.com/B...w/44765232.cms where the head of the CCI has made a statement that there is no scope for any investigation of Flipkart at the moment.

If a seller is not attracting all these three conditions he can legitimately give away products for free without any restrictions.

The ED notice to Flipkart is entirely different and arises due to a concern that Flipkart (through WS Retail) is engaged in multi brand retail funded by foreign investment which is not permitted. It has nothing to do with discounts or undercutting.

Originally Posted by sourabhzen

Government shall be interested in VAT or other taxes only. The full tax amount must be paid to government irrespective of the price it is sold. For example, government shall get full tax amount even if FK is giving an item for free.

Almost all indirect taxes on goods sold are linked to the sale price. The higher the price the more the tax. VAT, Excise, Service tax are all in this category. Whether the good is a car or a mobile, the indirect taxes paid will be a function of the sale price and not the 'ideal' price. This can be easily verified by looking at the invoice of a discounted good. A few indirect taxes like customs, stamp duty are often leviable on the 'fair' value of a product so those are not affected by sale price.

As a strategy I doubt giving hurtful discounts consistently makes much sense simply because most consumers are not very sticky when it comes to choosing the lowest price.Tomorrow if some other online or offline retailer (with a minimum delivery standard) offers the same product at less we will simply migrate there, much like economy airline tickets. However MRPs on products leave varying degrees of cushion for the seller and there is no reason why high margin products cannot be consistently sold at good discounts (>15%) without any adverse effect.

I am, of course, unhappy I got nothing out of the Flipkart sale and many products had illusory discounts but that does not change my general confidence in Flipkart. I still trust them to display reasonable prices as opposed to mom-and-pop offline stores which might pass off a product at an outrageously high price with no hangups and who cannot digest the fact that a competition could even think of selling a product below an MRP, let alone do so regularly. I like their search function, I like the review feature, and I love the convenience of home delivery with COD. Unless they mess up my orders (cancellation, wrong product, delay) I am going to stick to them and am certainly thankful that they exist. As consumers, I cannot understand why some people are quick to call for FK's head just because a 40% discount was in reality a 10% discount -- that is a trick all sellers use and a little due diligence before purchasing would have given a fair idea.