After their dirty laundry getting out in the public domain, the censure for Amazon India is set to draw closer.
India’s premier agency responsible for enforcing economic laws, the Enforcement Directorate (ED), has entered the fray now. According to fresh reports, the ED has reportedly asked Amazon.com, Inc. (NASDAQ: AMZN) to turn over information related to its operations in India.
This, after the furore caused by the Reuters report, led the agency to investigate the US e-commerce major.
Ever since the bombshell dropped over Amazon’s alleged preferential treatment to a select band of sellers, India’s federal financial-crime fighting agency has been examining the findings of the report.
The Reuters special report in question was based on internal Amazon documents dated between 2012 and 2019. It provided a never-seen-before inside look at how Amazon’s India platform had been trying to circumvent the country’s foreign investment rules.
The documents reviewed by Reuters showed how Amazon had been complicit in helping a small number of sellers prosper on its India platform. By giving them a competitive edge of discounted fees, the Seattle-based company was slyly helping cut special deals with big tech manufacturers such as Apple Inc.
Even though Amazon publicly claims that all sellers operate independently on its platform, the documents revealed that the Bezos-owned giant exercised a significant amount of control over the inventory of some of the biggest sellers on its Indian platform.
Now that ED is furthering the investigative process by asking for “information”, Amazon India chief Amit Agarwal has also told employees that the allegations of trying to slither past foreign investment rules and malpractices are “unsubstantiated, incomplete and factually incorrect”.
For Amazon, who for several years been under investigation by the agency for possible violation of foreign investment rules, this revelation seems like a tipping point of sorts.
It has been facing some intense backlash from the Indian retailers, who have long-held suspicions that e-commerce giants like Amazon and Walmart owned Flipkart have been carefully dodging federal regulations. Incidentally, they also form a crucial part of PM Modi’s support base, and no matter how directly correlated, the government has been trying to introduce diktats to level the playing field between online and offline retailers. The CAIT has specifically requested fresh Press Notes from PM Modi, seeing to block alleged FDI escape routes by e-commerce companies.
Amazon, for one, has been putting its best foot forward in the Indian land. A key market as seen by Bezos himself, Amazon is committed to the vision of Digital India, the US-based e-commerce giant growing to over 700,000 sellers on its platform in the last seven years, according to Amazon India Chief Agarwal. The company has also put forth an additional $1 billion to digitize as many as 10 million small businesses in the country by 2025.
It had also pumped in over Rs 11,400 crores during the FY2019-20 across its marketplace, payments, and wholesale business units in India to provide an upshot to become the country’s leading digital commerce market. As such, the e-commerce major has seen its losses mostly mount, as is evidenced by the chalking up of Rs 133 crore loss, with revenue of Amazon India’s wholesale unit tumbling down to a massive 70% YoY in the fiscal year ended March 31, 2020.
In the same period, rival Flipkart’s wholesale arm for starters, saw revenues rise 12% in FY20 to Rs 34,610 crore, cutting down losses to 18%.
If these numbers were not enough, Amazon has also been entrenched in a long battle for the control of the Future Group with heavyweight Reliance.
With the present predicament, the misery for Amazon in India can compound even further as the threat of the Competition Commission of India (CCI) coming knocking at the door is still in the equation.
Clearly going through a rough patch, the salvos have been fired at Amazon in the desi land. It will be interesting to see how Amazon wades through these troubled waters, and at what cost.
Stay tuned for more updates until then.
