Traders body Confederation of All India Traders (CAIT) has said that Indian companies are hand in glove with Amazon accusing retail giant Narayana Murthy of helping the company circumvent Indian laws.
In a letter written to Piyush Goyal, Minister of Commerce and Industry, it has demanded an investigation into the matter.
India doesn't allow marketplaces to sell their own inventory to the consumers. E-commerce companies have therefore devised preferred vendor model. As per the recent report of Reuters, almost two third of Amazon's business came from 35 preferred vendors on its platform at least till 2019.
Now Cloudtail, which happens to be a preferred vendor of Amazon, has been a joint entity between Amazon and Narayan Murthy's Catamaran Ventures.
Following the government's 2018 clarification and the introduction of Press Note 2, Cloudtail did a rejig.
In February 2019, Catamaran Ventures raised its stake in Cloudtail's parent company Prione Business Services. The move reduced Amazon Asia's stake in Cloudtail to 24 percent from the earlier 49 percent, with Catamaran Ventures’ stake rising to 76 percent from 51 percent earlier.
Following this, Cloudtail ceased to be an Amazon group company, making it compliant with the rules on the papers but yet not serving the purpose with which the norms were straightened.
The CAIT has also dragged banks such as HDFC Bank and State Bank of India for partnering with Amazon to give shopping advantage to people for purchasing goods exclusively from Amazon and other e-commerce companies.
It claims these offers are given in the form of cash backs on e-commerce sites but not to people who buy from offline stores.
"The policy of the government specifically provided that the marketplace (Amazon) should have no relation or control over the retailer (Cloudtail). However, on the contrary, these retail companies are fully controlled by Amazon and the marketplace is a myth created by Amazon," CAIT said in a statement.
"All orders go to Amazon which decides to which seller, the order is forwarded for delivery and naturally being the joint venture of Amazon, it always gives preference to the sellers who are either in indirect or direct control of Amazon," it added.
The traders body has also claimed that in Cloudtail as well as Prione Business Services, many senior employees including even managing directors are former employees of Amazon.
"We have reason to believe that Mr. Narayana Murthy, being one of the top corporate of the country is fully conversant with the operations of Cloudtail, much against the provisions of Press Note No.2 of the FDI policy and yet there is no dissent from Mr. Narayan Murthy. It amply ratifies the collusion between Mr. Narayan Murthy and Amazon for continuing its malpractices and unethical business operations in India. It is to be noteworthy that Mr. Narayana Murthy owns 76% in Prione. Prione owns 100% of Cloudtail yet the board of directors have Amazon in majority but the company is controlled, managed and operated by persons who were formerly employed with Amazon," it said.Moneycontrol has reached out to Narayana Murthy for his comment. The story will be updated if we hear from him.