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Fresh trouble brews for Amazon soon after it announces plans to manufacture in India

Amazon is known to be having a set of preferred vendors who get a majority of the business generated by the e-commerce giant.

February 18, 2021 / 09:26 PM IST

The timing just doesn't seem to be in favour of US-based e-commerce giant Amazon. A day after it announced its plans to manufacture its devices in India for the first time, it has again come under the spotlight for its efforts to dodge regulations in the country, one of its largest markets outside home.

According to a detailed report by international news agency Reuters, which has quoted documents dated between 2012 and 2019, Amazon has circumvented Indian laws which only allow marketplace models, on multiple fronts.

National Secretary-General of the Confederation of All India Traders (CAIT) Praveen Khandelwal told Moneycontrol that he was talking to his lawyer following the report, contemplating filing fresh petitions in either the Supreme Court or the High Court depending on the jurisdiction.

"Amazon and Flipkart have been indulging in all sorts of practices which are not allowed in India. It would encourage other companies including domestic firms to flout the law. Therefore, there has to be an exemplary punishment," he said.

The traders' body has been seeking government intervention in the issue of e-commerce companies for a long time now.

Last year, it also wrote to the Enforcement Directorate demanding strict action against Amazon claiming that it had caused "misery" to small traders by resorting to predatory pricing.

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Amazon is known to be having a set of preferred vendors who get a majority of the business generated by the e-commerce giant. The Reuters report quotes the number at 35 vendors which had been getting over two-third of its online sale in India till 2019. The 35 sellers included two of the most prominent ones where Amazon had indirect stakes -- Cloudtail (in partnership with Narayana Murthy's Catamaran Ventures) and Appario.

Following the December 2018 clarification issued by the government which brought Press Note 2 to life, Amazon did another rejig in its structure in India.

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 government had taken note of this and soon after Piyush Goyal assumed the office of Commerce and Industry Minister, he summoned the chief executives of about a dozen top companies including Amazon besides top online and offline companies of the country.

According to sources who were present in the meeting, Goyal was learnt to have told the companies to stop hunting for lawyers to find loopholes in the Press Note 2 and focus on following the law of the land in spirit.

All of this happens at a time when the company is also embroiled in a bitter battle with the country's leading retailer Future Group over a "disputed transaction".

While Amazon did not respond to a detailed questionnaire sent by Moneycontrol, in a statement it said it remained completely compliant and in accordance with all laws governing the marketplace.

It also said it cannot confirm the veracity of the claims made in the Reuters report given that it had not seen the documents.

"However, the article appears to be based on unsubstantiated, incomplete, and/or factually incorrect information, likely supplied (maliciously) with the intention of creating sensation and discrediting Amazon. Amazon remains compliant with all Indian laws. In the last several years, there have been a number of changes in regulations governing the marketplaces and Amazon has, on each occasion taken rapid action to ensure compliance. The story therefore seems to have outdated information and does not show any non-compliance. In the meantime, we continue to focus on delivering first class service to India’s consumers, and helping India’s manufacturers and SMB’s reach customers across India and around the world," it said.
Priyanka Sahay
first published: Feb 17, 2021 11:02 pm
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