The Confederation of All India Traders, a body of retailers, on Wednesday urged the Centre to shut operations of e-commerce major Amazon in the country, citing a Reuters report that suggested the company has allegedly been giving preferential treatment to a group of sellers. The e-commerce has, however, refuted the claims in the Reuters report.
On Wednesday, CAIT tweeted a post, tagging Union Commerce Minister Piyush Goyal, saying that the traders’ body stood “vindicated” in its claims that “Amazon has been circumventing FDI [Foreign Direct Investment] laws of India to conduct unfair and unethical trade”. Later on Wednesday, the traders’ body’s Secretary General Praveen Khandelwal retweeted the post demanding that Amazon should be “banned with immediate effect”.
“It’s an open and shut case that Amazon is wilfully playing with rules,” Khandelwal tweeted.
Amazon has, however, denied the claims in the Reuters report, and said that it “does not give preferential treatment to any seller on its marketplace” and “has always complied with the law”. In a written response to the news agency, it discredited the report saying that it “appears based on unsubstantiated, incomplete, and/or factually incorrect information, likely supplied [maliciously] with the intention of creating sensation and discrediting Amazon.”
Amazon dodged Indian regulators: Reuters report
The traders’ association’s response came after a Reuters report claimed that Amazon had “publicly misrepresented its ties” with sellers to circumvent rules dealing with foreign investment in e-commerce in India. By doing this, Amazon allegedly gave preferential treatment to a group of sellers, thereby making brick-and-mortar retailers. The report cites the company’s documents, between 2012 and 2019, to make the claims.
In one of the instances of Amazon’s alleged business tactics, Reuters reported that a seller named Cloudtail, which has reportedly been referred to as “SM,” or “Special Merchant”, in the documents. Cloudtail was set up in 2014, by Infosys founder NR Narayana Murthy, and Amazon maintains that it received “the same privileges as any of the other sellers”.
However, according to the Reuters report, the e-commerce company’s documents showed that its target was to ensure Cloudtail accounted for 40% of its sales and build it into a “$1+B business” in 2015. In this pursuit, Amazon allegedly helped Cloudtail “acquire key relationships” with major tech giants, including Apple, Microsoft and OnePlus. This, according to the Reuters report, included exclusive deals with these companies to sell their products, such as smartphones.
The Reuters special report claimed that this arrangement was done to bypass a regulation by the Indian government that does not allow e-commerce firms from holding inventories of goods and selling them directly to customers. E-commerce companies like Amazon can only collect fee from vendors selling products on their marketplace, according to Reuters.
Another example, cited by the news agency’s report, suggested that in 2017, another special merchant Appario – referred in the documents as “SM2” in an internal document – was created. An internal Amazon document from 2019, according to Reuters, stated that Appario and Cloudtail will get “subsidised fees” and access to the company’s global retail tools. The report also claimed that Amazon has equity investments in the two companies.
As a result of these measures allegedly taken by Amazon, the two companies together accounted for around 35% of the platform’s total sales revenue in early 2019.