Battle for Fair Play: Quick Commerce Under Fire over ‘FDI Rules Violation'; CAIT Demands Action

Quick commerce platforms have recently come under scrutiny from the retail traders and competition regulatory authorities of India over “laws violation” and “predatory pricing”. The latest concern has been raised by the Confederation of All India Traders (CAIT), the apex body of traders. The authority, in a letter written to Union Commerce Minister Piyush Goyal, sought his intervention and action against quick commerce companies for alleged “misuse of foreigh investments” to distort country’s retail market.

The CAIT accused the quick commerce giants like Swiggy Instamart, Zomato’s Blinkit, and Zepto of misusing funds received through Foreign Direct Investments (FDIs). It highlighted that these platfoms dominate inventory, control suppliers, and arbitrarily determine product prices to manipute the retail market. The organisation has also released a white paper on this matter and sent a copy to Goyal.

The primary objective of quick commerce companies is to eliminate small kirana stores, alleged CAIT National President BC Bhartia. He emphasised that these business practices create an uneven playng field, making it “impossible” for over 30 million grocery shops to survive.

Despite raising over Rs 54,000 crore through FDIs, the quick commerce companies have neither invested in infrastructure nor created long-term assets, said Bhartia. He added that they have leveraged these funds to cover business losses, control supply chains, and offer deep discounts through select ventors. In addition, he also mentioned about the dark stores set up by these companies, which is against the rules prohibiting them from establishing any kind of store.

CAIT Secretary General and Chandni Chowk MP Praveen Khandelwal also echoed similar sentiments in the letter to Goyal, criticising quick commerce companies for allegedly “driving small retailers out of the market”. According to him, these companies are violating FDI policies and flout the Competition Act. He has also announced plans to lead a delegation of traders to meet Goyal soon regarding this issue.

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What Do FDI, Competition Rules Say?

As per India’s foreign direct investment rules quoted by The Economic Times, foreign-funded online marketplaces are not allowed to own inventory or control seller on their own platform. Hence, the quick commerce platforms themselves should not own dark stores, rather they should be owned under separate entitites. Despite these rules, there are some loopholes in the structure.

The government is reportedly looking to understand whether these quick commerce platforms comply with the rules on how they run the dark stores at the ownership level after having raised significant amounts from foreign funds in recent months.

On the other hand, the Competition Act, 2002 addresses price-related competition concerns like deep discounting and predatory pricing. Under this, Section 3(4) of the Act prohibits anti-competitive agreements between enterprises operating at different levels of the production or supply chain in different markets that cause or are likely to cause an appreciable adverse effect on competition (AAEC).

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Additionally, Section 4 of the Act prohibits enterprises or groups from abusing their dominant position. Among the factors constituting abuse of dominance is the imposition of unfair or discriminatory conditions or prices, whether directly or indirectly, on the purchase or sale of goods or services—this includes predatory pricing.

The traders’ body highlighted these issues, saying the unchecked growth of these foreign-funded companies and elimination competition for independent retailers pose a significant threat to India’s small retail sector. It further urged the government to enforce strict monitoring of quick commerce companies through consumer protection rule and ecommerce policies.