CAIT Raises Red Flags Over Quick Commerce Firms' Rs 54,000-Crore FDI, Calls For Probe

The Confederation of All India Traders has added its voice to the growing demand for an investigation into the business models of quick-commerce companies like Blinkit, Swiggy Instamart and Zepto, citing violations of several regulations, including the Foreign Direct Investments Policy, Competition Act and the Foreign Exchange Management Act.

In a 24-page white paper released on Wednesday, the country's biggest trade body representing 8 crore retailers revealed that the top three players have cumulatively received a massive FDI inflow of more than Rs 54,000 crore, of which only 2.5% or Rs 1,300 crore has been used to create infrastructure assets.

It is estimated that over 50% of the FDI may have been spent covering operating losses, thereby violating FDI laws that was intended to foster long-term growth by creating assets and infrastructure, according to the white paper.

CAIT argued that these companies are operating dark stores — small warehouses used to store inventory to fulfill orders within 10 minutes — through a network of preferred sellers, contravening the FDI rules, which prohibits foreign-backed marketplaces from controlling inventory.

These platforms violate the Competition Act by restricting market access through exclusive deals with a few sellers. They offer deep discounts, engage in predatory pricing, and provide free or heavily discounted warehousing and delivery services to preferred sellers, a practice that has been severely impacting traditional retailers, according to the trade body. At least 2 lakh small neighbourhood retail outlets have closed in the past year.

CAIT Secretary General Praveen Khandelwal told NDTV Profit that the confederation would submit the white paper to the Competition Commission of India, Ministry of Consumer Affairs as well as the chief ministers of all states as retail trade is a state subject in a few days, urging the government to expand its probe to quick commerce platforms.

Earlier, a CCI investigation found that Amazon and Walmart's Flipkart breached antitrust laws. The investigation was triggered by a complaint from the Delhi Vyapar Mahasangh, which is an affiliate of the CAIT.

The quick commerce companies continue to face criticism for their business practices. The All India Consumer Products Distributors Federation also filed a complaint around similar issues with the commerce ministry and the Department for Promotion of Industry and Internal Trade.

These companies are also found to be non-compliant with the Food Safety & Standards Authority of India's Labelling and Display Regulations as well as the Food Safety and Standards Amendment Regulations of 2020, that mandates sellers and platforms to list food items only if they have a minimum of 30% of their shelf life or at least 45 days remaining at the time of delivery.

In response to consumer complaints, the food regulator has come down heavily on these companies, directing them to comply with the existing rules or face action.