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Price parity, a menace for IT industry

Price parity has become a major issue among the retailers community.  So much so that they have reached a point where they fear for their businesses in the months to come, claims Federation of IT association of Maharashtra (FITAM).IT-INDUSTRY

The issue of price parity is crippling     the IT industry across India, and to   fight it, industry organizations across the country are   highlighting the issue for governance attention. They are approaching the    government agencies to voice their grievances and work out a solution to curb   price parity at the hands of the expanding e-commerce market.

To start with,  Dipak Mortale, Vice President, FITAM had taken the issue to Maharashtra government and a wrote a letter to the Chief Minister Office highlighting the plight of the traditional retailers at the hands of few online players.

He wrote, “The IT hardware market is going through very tough time due to unethical practices by Online Sellers. They are selling products below manufacturing cost,  to increase prices of their share in the equities market. . This practice will destroy offline market players, harming their share prices as well. This could be a huge setback to the market in the coming days.”

Mortale claims that more than 10,000 shops and retailers will have to shut their business in the future if this unethical practice will continue unchecked. The issue has been referred to Additional Chief Secretary (Home Dept.) & Principal Secretary (Industries) for necessary action.

While associations are making  efforts from the ground level to bring this issue to the forefront,  Federation of All India Information Technology (IT) Associations conducted a meeting  with all the regional IT associations to discuss on the predatory prices, unfair trade practice, and the challenges faced by the channel community due to online trading.

In the meeting, Indian Information Technology (IT) channels advise global brands to control predatory pricing tactics of e-commerce industry or face non cooperation from November 24, 2014. The association in conjugation with all other IT associations has passed these resolutions. Associations representing the State of Punjab, Tamil Nadu, 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.

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.

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 marketplace must be prevented from doing such transactions again.

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.

In a letter to SEBI All Delhi Computers Traders Association highlighted the ulterior motive of the online players. Following are the points that the association has mentioned in the letter:

  • Few companies namely Flipkart, Snap deal and Amazon are engaged in selling the goods through internet sale.
  • In most of the cases it is verified that these companies are selling the goods less than their purchase price. Due to their unfair trade practice these companies managed to capture the max market share.
  • This kind of unfair trade practice is common in India and such companies have sole motives that  allow them:

i)                    To increase the creditors amount through buying the goods on credit at higher price and selling the same good on cash at lower than purchase price. At last these companies run away with the money of creditors.

ii)                   To Increase the sale turnover so as to avail the maximum loan from Bank and ultimately cheat the bank of funds

iii)                 To Increase the sales turnover and fabricate their books of account so as to reflect profit in their balance sheet. And ultimately list their companies in stock exchange so as to issue IPO on premium and grab the hard earned money of investors.

  • In order to protect the distributors / dealers / revenue of Government of India / consumers, we ADCTA submitted several documents as evidence with the request to C.B.I. and other concerned appropriate authorities of India for conducting enquiry of above mentioned companies for their ulterior motive.
  • Based on the facts submitted by us, said department have taken serious view against above mentioned companies and already initiated action accordingly.
  • In case such companies manage to register themselves in the Stock exchange for issuing the IPO, they  will achieve their ulterior motive to cheat innocent investors. Therefore in the large interest of Public of India and Revenue of Government of India, you are requested to kindly not to allow to Flipkart, Snap deal and Amazon to register them in stock exchange till CBI and other agencies finish their enquiry/investigate and reach to final conclusion.

In wake of the protest the Chandigarh observed the IT Bandh protest against online trading which was a massive success. Over 700 members, partners, and IT dealers participate in the protest in Ludhiana and staged a march to tax commissioner and national distributor offices.

Punjab Association of Computers Traders (PACT) President Gurpreet Singh Sunny has asked the IT dealers to stop buying products and boycott them till further notice. In a unanimous decision the association will continue to pressurize vendors through National Distributors boycott so as to push them to yield result to correct online price parity issue.

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