India’s competition commission will re-launch an investigation into Amazon’s sales practices, which will examine the £ 1billion-a-year joint venture with British Chancellor’s billionaire stepfather Rishi Sunak.
The investigation, originally announced in January 2020, will continue after an Indian court on Friday dismissed demands by Amazon and its rival – Walmart-owned Flipkart – to quash its investigation into the business practices of huge US retailers. .
One of the biggest sellers on Amazon.in is a company called Cloudtail, a £ 1 billion company 76% owned by Sunak’s wealthy in-laws, the Murthy family. The remaining quarter of Cloudtail is owned by Amazon.
India’s Competition Commission (ICC) will look into complaints from a group of traders that small sellers are being driven out of business because large US platforms give preferential treatment to ‘preferred sellers’.
Under India’s Foreign Direct Investment Act, foreign companies are prohibited from operating an online retailer that holds inventory and then sells the products directly to Indian consumers online. So instead, US websites such as Amazon.in are run as a “marketplace” with Indian retailers selling their products through the site in exchange for paying a fee to the US company. Small traders allege they are at a disadvantage because US platforms may favor a few large sellers, including Cloudtail.
The issue is politically sensitive, as it has the potential to anger millions of small internet retailers who form part of Indian Prime Minister Narendra Modi’s political base.
A source familiar with the ICC investigation confirmed that Cloudtail was included in the broad antitrust complaint.
Sumit Agarwal, the national secretary of the Confederation of All Indian Traders (CAIT), whose affiliate has filed a complaint with the competition authorities, said: “Foreign companies, especially in the e-commerce sector, see India as a banana republic where the laws, policies and rules are not sacred… Unfortunately, they have successfully violated the law and policies, placing the small traders in the country at a great disadvantage. “
The trade body added that the decision “fully justifies CAIT’s position that Amazon and Flipkart’s business model is based entirely on violating IDE policy, rules and other laws and therefore without wasting any more time, the ICC should immediately begin its investigation ”.
After the regulator announced its investigation last year, U.S. companies denied the wrongdoing and a court suspended the investigation.
However, on Friday, Judge PS Dinesh Kumar of the high court in the southern state of Karnataka said he was rejecting Amazon’s and Flipkart’s claims and denied them any further redress, thus opening the way to the resumption of the investigation.
US companies should appeal the verdict.
An Amazon spokesperson said: “We will carefully review the judgment and decide on the next steps. “
Flipkart did not respond to an invitation to comment.
When the competition panel initially ordered its investigation, it listed four alleged anti-competitive practices.
These are: exclusive launches of mobile phones by e-commerce companies; promote preferred sellers on their websites; deep discount practices; and prioritize certain lists of sellers over others.
At the same time, Amazon is also facing a second complaint to the ICC.
In August, the All India Online Vendors Association alleged that its members were disadvantaged by the wholesale arm of Amazon India, which bought goods wholesale from manufacturers and sold them at a loss to sellers such as Cloudtail. These sellers then offer products on Amazon.in with big discounts, it is claimed.
The second complaint is still being examined by the ICC to decide whether it will progress towards a full investigation.
Amazon said it complies with all laws and that its Indian website is a pure third-party marketplace where sellers have discretion to decide product prices. Amazon also said that its wholesale unit allows businesses to buy products and anyone can sign up.
Cloudtail did not respond to the Guardian’s request for comment, but in response to news of the complaint in August, a Cloudtail spokesperson said it was “in compliance with all applicable laws in its operations.” .