CONTROL PREDATORY PRICING

Indian Information Technology (IT) Channels advise global  brands to control predator y pricing tactics of electronic marketplaces or face non cooperation from November 24 ,2014.

ImageA meeting of the Federation of All India Information Technology (IT) associations was held on 7 November , 2014 in New Delhi , India . The meeting was attended by leaders from all Regional IT Associations including several state level associations . After detailed discussions on the matters related to predatory pricing , unfair trade practices and the challenges faced by the channel community due to the online marketplaces the following resolutions were passed :
1. The Associations representing the State of Punjab, TamilNadu, Chandigarh and one district level association in Maharashtra who had stopped purchases from Distributors till resolution of the predatory pricing issue were advised to call off their voluntary restraint and commence business with Distributors with immediate effect.
2. All OEMs, Brands, National Distributors are hereby advised that they should appreciate the problems being faced by the channel community and take the following compliance action on or before 24 November , 2014 :

a)Ensure that MOP ( Market Operating Price) and MRP ( Maximum Retail Price) are in line with operating prices at which channels are advised to sell. Several local and global brands have taken corrective and preventive action to ensure that online marketplaces do not undercut prices directly or through their sellers. All Brands / OEMs have their rights within law to do so and are advised to put a system in place.

b) Any incident where violation of MOP, MRP takes place the  OEMs/ Brand / NDs ( National Distributors ) must immediately take corrective action by ensuring that online marketplace / or their partners/sellers are immediately brought to books . Such seller / online markeplace must be prevented from doing such transactions again.
c)All Brands/OEMs/NDs are advised to comply with the above guidelines by 24 November , 2014 . While the channel Associations all over India will continue to do business with such Brands/OEMs/NDs who comply with the above requirement, the entire channel community across India will stop doing business with Brands/OEMs/NDs who do not comply with the above guidelines.

WHY ?

Predatory Pricing:The Competition Commission of India (CCI) defines “predatory price “ as the sale of goods or provision of services at a price which is below the cost , as may be determined by regulations , of production of the goods or provision of services, with a view to reduce competition or eliminate the competitors.

Social Impact:Millions of small Indian businesses are getting disrupted in the short term due to the tactics used by electronic marketplaces probably in connivance with brands and other vested interest groups. This has a very deep social impact on all people engaged in the retail and channel business. Delays in assessing this will lead to unprecedented damage to the SME segment.

Unemployment:The drop in business volumes and erosion of profitability and the increased pressure from brands to stock will compel most SMEs to reduce their overheads leading to loss of existing jobs.

Loss to state revenue:Indian States are losing tax revenues due to the fact that many market places are exploiting the loopholes of the existing state and federal laws . This was recently found out in the state of Kerala where the government has temporarily banned eCommerce deliveries.

Recourse for channels:Competition Commission of India , Government of India , Political parties, Indian and International Trade Bodies are being
approached with evidence of predatory pricing . But Brands, Distributors and channels are quite capable of self regulation. We have initiated engagement with OEMs, Distributors, Media and other agencies. . We want a level playing field for all stakeholders.

Black Money:Are the market places being used to launder and generate black money ? We seek an investigation by government agencies to quash this allegation made by a section of people.

Role of Brands: Most Brands are looking at e-marketplaces as another channel customer base. Indian Channels welcome competition. No issues. How ever MOP ( Market Operating Prices ) and MRP ( Maximum Retail Price ) needs to be maintained and strict and quick action to be taken against channels who are flouting norms. Some Brands are doing this. So why not the others ?

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