What does the EU competition watchdog investigation on Amazon mean for its India operations

The European Union recent investigation into Amazon's business practices could be a trendsetter of sorts for other countries, especially India.

It is highly relevant given the severe backlash the two e-commerce players,  Amazon India and Walmart-owned Flipkart have faced, from the sellers over predatory pricing and unfair trade practices.

"Opening of investigation by the EU amply endorses the complaints of CAIT which is being made against global e commerce players conducting business activities in Indian," said Praveen Khandelwal, Confederation of All India Traders (CAIT).

At a time when the industry is awaiting its e-commerce policy, the investigation assumes significance irrespective of the outcome.

In India, in the e-commerce space, Flipkart is the market leader with revenues up to $3.8 billion as opposed to Amazon India's $3.2 billion, according to reports..

In an earlier conversion with Moneycontrol, Khandelwal pointed out that the platform lacks transparency. "So far the company has not divulged their business model in India like the business figures here," he added.

In addition, he said, CAIT has been receiving complaints from sellers selling on marketplaces regarding the discrimination, unfair treatment and unjust policies of the marketplaces.

These complaints are two-fold. It includes the role the e-commerce giants play as a marketplace and also retailers having stakes in retail outfits.

The backlash is primarily for promoting the fulfillment platform Cloudtail and Appario, which Amazon partially owns through a joint venture and is known for deep discounting. In case of Flipkart, its preferred sellers were Retailnet, Omnitech Retail, SupercomNet.

Few sellers have claimed that this does not provide its sellers a level playing field.

As per industry estimates, Cloudtail and Appario make nearly 50 percent of the daily volumes on the site. However the company has made some restructuring by selling its stake in Cloudtail over a revision of Foreign Direct Investment (FDI) rules. Some reports said that the company is doing similar restructuring in Appario as well. Flipkart has restructuring as well to comply with the norms, according to reports.

As per FDI norms, e-commerce players should not have over 25 percent purchase from its marketplace entity including its retail unit.

How will such investigation help?

Prior to the investigation on Amazon, EU’s competition watchdog has penalized tech giants Google and Facebook over abuse of dominance.

We are beginning to see similar trend in India as well. The Competition Commission of India (CCI) recently ruled that Google's Android is abusing its dominance in the smartphone market. In 2018, CCI had fined Google Rs 136 crore for abuse of dominance in another, which the company is fighting it in the appellate court.

Though the e-commerce market is currently evolving and a policy is awaited, Khandelwal said that the similar investigation should be done in e-commerce marketplace sector.