E-commerce norms flouted despite Amazon tweaking ownership

New Delhi, The Indian e-commerce market is expected to reach $200 billion by 2026 from the current $48.5 billion (as of 2018) and to create a level-playing field for small and medium players, the government brought in a new e-commerce policy and fresh rules around FDI in the sector in February this year that forced online marketplaces like Amazon India to change its ownership pattern in local partners like Cloudtail and Appario Retail.

However, this has not stopped anti-market "predatory pricing" and "deep discounting" practices as violations of the e-commerce norms continued during the year, especially in the festive season, allege traders' bodies who intensified the protest against deep discounts and disruptive offers by e-commerce majors Amazon and Flipkart by organising a day-long hunger strike in several parts of the country on December 27.

"We want Indian e-commerce market free from all glitches, unhealthy and unfair business practices, and till the government takes any action, our national agitation will continue," said Praveen Khandelwal, Secretary General of the Confederation of All India Traders (CAIT).

In order to comply with stringent e-commerce regulations, Amazon.com has already sold much of its stake in its desi partner Cloudtail, a joint venture between the Jeff Bezos' behemoth and software major Infosys founder N.R. Narayana Murthy's Catamaran Ventures.

Amazon sold 25 per cent of its shares to Prione Business Services Pvt, a company run by Catamaran.

According to media reports, Prione now owns 76 per cent of the venture and the remaining 24 per cent is reportedly owned by Amazon Asia-Pacific Resources Ltd, a non-Indian arm of the US retailer. Thus, Cloudtail technically is no more an Amazon company and is eligible to sell on the marketplace.

Catamaran is now being headed by ex-Infosys CFO Ranganath Mavinakere, Murthy's all-time favourite.

On the other hand, Appario Retail is a wholly-owned subsidiary of the joint venture between Amazon India Ltd and Ashok Patni, the co-founder of Patni Computer Systems.

But it is Cloudtail that is profit-making venture for Amazon in the country, fulfilling over 25 per cent of all Amazon India orders.

Cloudtail India reported a revenue growth of 25 per cent to Rs 8,945 crore in the previous financial year.

According to media reports, while Amazon has over four lakh registered sellers, Cloudtail and Appario alone account for around 50 per cent of the sales.

Walmart-owned Flipkart has not been impacted much as it has significantly reduced its dependency on vendors.

According to Prabhu Ram, Head, Industry Intelligence Group (IIG), CMR, "The beneficiaries of the new e-commerce policy would potentially be small and bespoke e-commerce players, who could benefit from the level-playing field that the policy aims to provide."

However, according to the traders' body, the online platforms are indulging in preferential seller system and more than 80 per cent of their sales are made by just their 10-15 preferred sellers.

In a recent letter written to Prime Minister Narendra Modi, CAIT said the anti-market practices followed by the e-commerce players have created an uneven playing field, unfair and unethical competition, thus destabilising the overall retail trade.

Amazon India, however, discarded the allegations of deep discounting and predatory pricing.

"Amazon is a 100 per cent pure marketplace in India. Sellers set the prices on their own. We do not interfere there at all," Gopal Pillai, Vice President, Seller Services, Amazon India, told IANS in an interview earlier this month.

Following the complaints, the Department for Promotion of Industry and Internal Trade (DPIIT) sent a questionnaire to Amazon and Flipkart over their adherence to the FDI norms.

The All India Online Vendors Association (AIOVA) has also filed a petition with anti-trust regulator the Competition Commission of India (CCI), alleging that the Amazon India favours merchants that are its subsidiary, such as Cloudtail and Appario.

AIOVA, which represents more than 3,500 online sellers, reportedly said that large sellers such as Cloudtail and Appario are being given preferential treatment by charging significantly less than Amazon's advertised rates for other sellers.

Earlier this month, the government made it mandatory for e-commerce firms to submit FDI policy compliance report by statutory auditor by September 30 every year.

The e-commerce companies have to obtain statutory auditor report by September-end for the preceding financial year, the government said in a notification, hoping that the move will help ensure compliance of the FDI policy in the e-commerce sector in 2020.