Allegations of business practices that seem to go against the letter and spirit of India’s foreign investment rules have been made against e-commerce giant Amazon.
It is alleged, in a report published by Reuters, that Amazon has for years been adjusting its corporate structures each time the Indian government imposed new restrictions aimed at protecting small traders.
Indian traders have long alleged that Amazon’s platform largely benefits a few big sellers and that the company engages in predatory pricing that harms their businesses. The documents seen by Reuters seem to imply that Amazon helped a small number of sellers to make a lot of money, giving them discounted fees, and using them to bypass India’s regulatory restrictions on foreign investment aimed at protecting small traders.
That meant, Reuters suggests, that some 35 of Amazon’s more than 400,000 sellers in India in 2019 accounted for around two-thirds of its online sales.
Amazon insists that it has always complied with the law in India, that it treats all sellers fairly and that every seller is responsible for independently determining prices and managing their inventory.
Amazon has invested a lot in India. Amazon founder Jeff Bezos announced early last year that the company would spend $1 billion to bring small businesses online in the country, boosting its committed India investment to a potential $6.5 billion.
India may, therefore, need Amazon. However, Amazon needs India too: it is estimated to have enjoyed close to $10 billion in Indian sales in 2019 – but the potential of the Indian retail market is much greater.
This news is also unhelpful as it comes when Amazon has hit the headlines in a more positive way after announcing plans to begin making devices in India for the first time through a subsidiary. Hundreds of thousands of the company's Fire TV Stick devices are to be manufactured every year in India.
These issues may eventually be resolved, but Indian traders are a crucial part of the prime minister’s support base, and they will probably want clear guarantees that their businesses can safely co-exist with the e-commerce giant.