Discounted mobile phones on e-commerce sites caused 2 lakh people to lose jobs: ICA

A study by handset maker's lobby Indian Cellular Association (ICA) says that sales of mobile phones at discounted prices by e-commerce platforms has led to unemployment of nearly 2 lakh people. It claims that these discounts had led to the closure of some 40,000 stores across India. The study says these e-commerce platforms are violating foreign direct investment (FDI) rules by offering discounts, directly or indirectly, on mobile phones and other products through intermediaries or partner companies. 

In the report, ICA has argued that the companies were circumventing rules under Press Note 3 on FDI by holding inventory and influencing the prices of electronic goods, eroding offline retailers’ revenue and putting jobs at risk. The second threat that led to the closure of several mobile stores is the availability of the handsets on the companies online platforms as well as in their offline stores, which provide exclusive deals to customers. 

Highlights of the impact of e-commerce platforms on jobs

• The report says, about 1.50 lakh people associated with mobile retail and distribution have lost their jobs. 
• It also claims that more than 80,000 promoters of various mobile brands have lost their jobs. Promoters are those people that mobile companies keep for promoting their brands at large stores. These brand promoters go one-step further from the other brands and affect the consumer who comes to the shop and is looking for a device to buy.  
• Presence of e-commerce platforms has led to the closure of about 15 per cent offline mobile stores. The number of stores has gone down to 2,50,000 from 2,95,000 in past one year. 
• E-commerce companies predatory pricing and unethical market access are two reasons behind the joblessness in the sector. 

The ICA, earlier in March 2018 in a letter to the commerce ministry urged the commerce minister to take an action against Amazon and Flipkart. In its letter, ICA alleged that the e-commerce platforms are violating foreign direct investment (FDI) rules by offering direct or indirect discounts on the handsets. 

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Sources close to the development informed that following the complaints by ICA, the commerce ministry has sent the matter to RBI and ED for investigation. Action may be taken against e-commerce platforms in case the allegations are proved to be true.