India’s antitrust body launched raids at two top sellers of Amazon.com Inc over violations of domestic competition laws, two sources with direct knowledge of the matter

Industry body Confederation of All India Traders (CAIT) welcomes raids

New Delhi/ Bengaluru, NFAPost: India’s antitrust body launched raids on Thursday against two top domestic sellers of online retail giant Amazon.com Inc over accusations of having violated competition laws, two sources with direct knowledge of the matter told Reuters.

Indian retailers, a key part of Prime Minister Narendra Modi’s support base, have long contended that Amazon’s platform largely benefits a few big sellers, with the firm engaging in predatory pricing that harms their businesses.

The company says it complies with all Indian laws.

The exact nature of the purported violations prompting Thursday’s raids was not immediately clear. The two sellers were Cloudtail and Appario, the sources said on condition of anonymity, as the details were not public.

Amazon, which has an indirect equity stake in both, did not immediately respond to a request for comment. Cloudtail, Appario and the regulator, the Competition Commission of India (CCI), also did not immediately respond to emailed queries.

One source said the raids, carried out in the capital, New Delhi and the southern tech hub of Bengaluru, related to CCI’s investigation ordered in January 2020.

In that case, Amazon and rival Walmart’s Flipkart face accusations of anti-competitive practices, such as promoting preferred sellers on websites and giving priority to listings by some sellers.

The companies deny the accusations, and the antitrust investigation continues.

Amazon has previously said it “does not give preferential treatment to any seller on its marketplace,” and “treats all sellers in a fair, transparent, and non-discriminatory manner”.

A Reuters investigation last year, based on Amazon documents, showed it had given preferential treatment for years to a small group of sellers, including Cloudtail, and used them to bypass Indian laws.

The report showed Amazon had for years helped a small number of sellers prosper on its platform, with discounted fees and helping Cloudtail strike special deals with big tech firms.

The anti-trust body told a court the Reuters report corroborated evidence it had received against Amazon.

In August, Amazon and Cloudtail decided the latter would cease to be a seller from May 2022.

CAIT lauds CCI raids

The Confederation of All India Traders (CAIT) which represents about 70 million traders in the country has hailed the Competition Commission of India (CCI) for conducting raids on the offices of Cloudtail and Appario, both sellers of e-commerce giant Amazon.

“It is a much-awaited welcome step of CCI which will surely vindicate the substance of various complaints made by the CAIT against Amazon and Flipkart,” said CAIT secretary general Praveen Khandelwal, while commenting upon the action of the CCI.

India’s antitrust body has reportedly launched raids against the two top domestic sellers of Amazon over accusations of having violated competition laws. According to the sources, the raids are related to CCI’s investigation ordered in January 2020 about allegations of anti-competitive conduct such as giving deep discounts on online sales of smartphones, and cherry-picking sellers. Other allegations included predatory pricing and exclusive partnerships.

For the past three years, the CAIT said it has been raising strong objections against the malpractices of Amazon and Flipkart and filed complaints with CCI, besides strongly fighting delaying tactics of Amazon and Flipkart in various courts as well.

In March this year, CCI cleared Amazon’s proposal to acquire Catamaran Ventures’ entire stake in Prione Business Services Pvt. Ltd., the joint venture between Infosys co-founder N R Narayana Murthy’s Catamaran Ventures and the US-based e-commerce giant. Prione Business Services houses Cloudtail, one of the largest retailers on the e-commerce firm’s Indian platform. Another seller, Appario Retail is a subsidiary of Frontizo, which is a joint venture between Amazon and the Patni Group.

“The role of Mr Narayana Murthy should also be investigated while conducting the raid,” said Khandelwal. “CAIT appreciates the action taken by DG, CCI.”

CAIT National President B C Bhartia and Khandelwal, and National Secretary Sumit Agarwal, in a joint statement, said the situation demands that all the records on paper and computers of both the sellers pertaining to the complaints of should be confiscated so that these can not be tempered. The seizure of records will amply substantiate the charges made by CAIT against Amazon and Appario.

“Besides, these two sellers, other top 20 sellers of Amazon in last 5 years, should also be properly scanned since Amazon is flouting all laws and FDI (foreign direct investment) policy of the Government,” alleged Bhartia, Khandelwal and Agarwal.

They alleged that Amazon is trying to create a monopolistic market in India for a long time and there is no transparency on Amazon’s e-commerce portal thereby causing huge damage to small retailers in the country and collateral damage to the consumers.

The trade leaders further said that predatory pricing, deep discounting, loss of funding, the exclusive sale of branded products in collusion with respective corporate companies, and owing inventory are some of the fundamental issues raised by the CAIT. All these practices are explicitly prohibited under Press Note 2 of FDI policy of 2018.

CAIT alleged that the biggest hit verticals due to the malpractice of Amazon and Flipkart include mobile, FMCG, consumer durables, clothing, readymade garments, beauty care products, watches, gift items and furnishing fabric.

All the employees of Cloudtail and its parent firm Prione Business Services, numbering about 1,200, were reportedly being moved to Amazon India, according to the sources. The process was expected to be completed by the end of May.

The relationship between N R Narayana Murthy and Amazon founder Jeff Bezos goes back to 2014, when Prione, a 49:51 JV, was formed. In 2019, the JV was restructured after the government stipulated that foreign e-commerce marketplaces cannot sell the products of their group companies on their platforms.

Following this, Catamaran Ventures increased its stake in Prione to 76 per cent, reducing Amazon Asia’s stake to 24 per cent. A major chunk of Prione’s revenues came from its ownership of Cloudtail, one of the biggest and most profitable retailers on Amazon.

However, such partnerships face stiff resistance from local trade associations including CAIT and its affiliate Delhi Vyapar Mahasangh (DVM) that perceive Amazon and Flipkart as threats to local retailers and they have alleged preferential treatment to select sellers. They have said that Cloudtail, one of the largest sellers on Amazon India website, is owned by Prione.

Last year in August, Amazon and Catamaran Ventures “mutually decided” to not continue their joint venture (JV) beyond the end of its current term. The JV, Prione Business Services, which has been running successfully for the past seven years, was coming up for renewal on May 19, 2022.

Last year in December, Amazon had said that Prione Business Services will be acquired by Amazon, subject to the requisite regulatory approvals.

The businesses of the JV continued under the leadership of the current management and once the regulatory approvals came through, the board of Prione and Cloudtail (owned by Prione) was expected to complete the transaction in compliance with the applicable laws.

CAIT had come down heavily on the CCI for dropping the investigation against Amazon for violations pertaining to selling private labels on its portal. CAIT had termed the CCI as a spineless toothless body incapable of discharging duties as an Anti-Trust Regulator.

It alleged issues were kept pending for a long and indefinite period and by that time, the gravity of the issue already caused damage to the affected party. The CAIT has demanded an in-depth study of the working of the CCI and remedial measures to make it a more efficient and accountable regulator like TRAI and SEBI.

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