GOQii struck a pact with Flipkart India Pvt. Ltd. in 2016, later amended in 2018, to sell its Vital, Pulse and Stride fitness trackers, according to the notice sent to the online retailer. The two later mutually agreed over email to determine the price at which GOQii will sell goods manufactured by it to Flipkart India, the e-commerce company’s wholesale arm.
The minimum selling price of GOQii Vital, according the notice, was Rs 1,999, or about 43 percent discount to an MRP of Rs 3,499. Similar agreements were struck for other products as well. To be sure, it’s not clear whether the agreement was to set the minimum selling price for trackers on Flipkart.com or the minimum price for sale to Flipkart’s wholesale arm. In an interim order, the Bombay City Civil and Sessions Court said it is necessary to stop the sellers from selling the disputed products to prevent further unascertainable damages to the plaintiff. Early this month, in a legal notice sent to Flipkart, GOQii said the deep discounts, which started in May, violated its sales agreement with the online marketplace. It also said such discounting of its products violated the foreign investment policy in e-commerce.A person privy to the development told BloombergQuint that the agreement said Flipkart will not sell the products to re-sellers beyond the lowest price. He didn’t want to be identified as the matter is pending in court. When 70-80 percent discounting of the trackers was found by the wearable firm, the company wrote to Flipkart on May 18 saying that it was offering “unauthorised discounted prices and that is leading to predatory pricing, and violated the agreement”, the notice said. It asked Flipkart to stop selling products at an unauthorised price. The foreign direct investment policy doesn’t allow e-commerce marketplaces to directly or indirectly influence the sale of goods or services, and calls for maintaining a levelplaying field. But there is no legal impediment on a wholesaler to contractually agree on the price at which it purchases the goods from a manufacturer and sells it to a re-seller, said VaibhavKakkar, partner at L&L Partners. “This remains a determination of facts as to whether the ultimate price at which the re-seller was selling the products of GOQii has been influenced,” he said. “Unless that is made, the marketplace entity cannot be construed to have violated the e-commerce policy.” Arul George Scaria, assistant professor of law and co-director at Centre for Innovation, Intellectual Property and Competition, agreed but with a rider. He pointed a flaw in the supply agreement that could essentially put Flipkart and GOQii in trouble. “The lowest price drop clause in the agreement which GOQii claims could spell trouble for both if any such agreement is made that puts a cap on the reselling price and is against the competition as per as per Sec 3(4) (e) of Competition Act 2002,” he said. He, however, said the matter of predatory pricing should be left to the Competition Commission of India. “One needs to be extra cautious about over-regulation that could hamper the growth of this nascent industry.”
Later, this dispute was resolved amicably by both the parties and withdrew the case and it is out of the Court.