Fine and fightback: What is the story behind Amazon’s anti-trust problem in India?

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Confederation of All India Traders (CAII) supporters holding placards during a protest against Amazon and the proposed increase in GST on various goods, at Chandni Chowk, in Delhi (ANI)

A trade body CAIT has requested Union Commerce Minister Piyush Goyal to order for immediate suspension of Amazon portal in India

Our Bureau
New Delhi

The Competition Commission of India (CCI) has slapped Rs 202 crore penalty on Amazon for providing false information and suppressing material particulars in the deal to acquire a stake in Future Coupons Private Ltd (FPCL). The competition watchdog has also suspended the deal. In 2019, the US-headquartered e-commerce giant Amazon announced the acquisition of 49 per cent shareholding in Future Coupons Private Limited, which is a part of Future Group. In a 57-page order, the CCI noted that Amazon suppressed “the actual purpose and particulars” of the 2019 deal.

The CCI noted that there is a “deliberate design on the part of Amazon to suppress the actual scope and purpose of the Combination, and the Commission finds no mitigating factor.”

“Resultantly, the Commission considers it appropriate to levy the maximum penalty of Rs. 1 crore each under the provisions of Section 44 and Section 45 of Act. Accordingly, Amazon is directed to pay a penalty of Rs.2 crore,” CCI said.

Reacting on the CCI order, trade body Confederation of All India Traders (CAIT) said: “The order of the CCI penalizing Amazon for Rs 200 crores and suspending Future deal is a landmark order and Amazon stands fully exposed for its mal-practices, and a bunch of lies at all levels together with continued violation of laws and the rules.”

The CAIT has requested Union Commerce Minister Piyush Goyal to order for immediate suspension of Amazon portal in India, CAIT Secretary General Praveen Khandelwal said in a statement.

But Amazon Inc is taking India’s financial crime fighting agency to court, seeking to quash an investigation into one of its 2019 deals. India’s Enforcement Directorate (ED) has for months been probing Amazon’s $200 million investment in India’s Future Group for suspected violations of foreign investment laws.

The investment is at the center of protracted legal battles, as Amazon has used the terms of that deal – and cited contract breaches by Future – to stall the $3.4 billion sale of the Indian company’s retail assets to a rival.

Multiple Amazon executives, including its India head, had been summoned by the ED in recent weeks and the investigation had caused “unnecessary harassment,” the U.S. e-commerce giant said in its filing to the Delhi High Court on Dec. 21. “The directions by the ED asking for disclosure of legally privileged documents and litigation privilege information is derogatory of the principles” laid out in Indian constitution, Amazon said in the filing, which is not public. “The investigation is a fishing and roving exercise.”

Amazon and the ED, which does not make details of its investigations public, did not immediately respond to requests for comment. The case will likely be heard on Thursday. The filing is the latest twist in the long-running dispute between Amazon and Future. Though India’s antitrust body suspended their 2019 deal last week, saying Amazon had suppressed information when seeking approvals for it, the ED’s probe is independent of that.

The dispute centers around three commercial agreements signed between Future and Amazon entities, which a Singapore arbitration panel – also hearing the dispute – has said must be read together when reviewing the transaction.

Amazon’s court filing contained a notice from the ED dated Feb. 19 which sought details of its investment in Future, including copies of agreements, bank account details and other related internal communication. It also showed the ED is conducting a far wider probe, and had sought details of big vendors on Amazon’s e-commerce website in India, including sales numbers for those that account for more than 5% of total sales on Amazon.in.

But in the meanwhile, Amazon is buying out NR Narayana Murthy’s investment firm Catamaran’s 76% stake in Prione Business Services. The latter runs Cloudtail, the largest seller on the Amazon India marketplace with revenue of over Rs 16,600 crore in fiscal year 2021. It is also Amazon’s arm that helps bring in third party sellers onto its platform.

Indian laws prohibit a marketplace operator to be a seller on the platform. So, Amazon cannot run Cloudtail on its own platform. Amazon did not say what its plans are for Cloudtail. Sources in the retail sector said they would try to divide Cloudtail’s business among multiple other vendors. It’s not clear how much time regulators have granted Amazon to complete this process.

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