Amazon India’s Alleged Strategy to Dodge Regulators Said to Be Investigated by Enforcement Directorate

A Reuters report alleged that Amazon has for years given preferential treatment to a small group of sellers on its India platform.

By Reuters | Updated: 19 February 2021 11:21 IST

Amazon India’s Alleged Strategy to Dodge Regulators Said to Be Investigated by Enforcement Directorate

Amit Agarwal addressed Reuters story, saying he understood such instances can be distracting

Highlights

Amazon is already under investigation by India's Enforcement Directorate
Such probes typically take years in India
Amazon criticised the report as unsubstantiated, factually incorrect

India's federal financial crime-fighting agency will examine findings in a Reuters report, which revealed that Amazon has for years given preferential treatment to a small group of sellers on its India platform and used them to circumvent the country's foreign investment rules, a senior agency source told Reuters on Thursday.

The story, which was published Wednesday, was based on internal Amazon documents dated between 2012 and 2019. It provided an inside look at the cat-and-mouse game Amazon has played with India's government, adjusting its corporate structures each time the government imposed new restrictions aimed at protecting small traders.

On Thursday, a senior Enforcement Directorate source told Reuters that "we will be examining findings" of the story. The subject matter "is not entirely new for us," said the source, without elaborating. The source asked not to be identified.

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Amazon didn't immediately respond to a request for comment.

Amazon is already under investigation by India's Enforcement Directorate for possible violation of foreign investment rules. Such probes typically take years in India, and in most cases details aren't made public. In the report published Wednesday, Amazon said it was confident of its compliance, when asked about the agency's probe.

In tweets issued on Wednesday, Amazon criticised the Reuters report as "unsubstantiated, incomplete, factually incorrect," without going into specifics. "In last several years, there have been (a) number of changes in regulations; Amazon has on each occasion taken rapid action to ensure compliance," the company said.

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In an e-mail to employees on Thursday, Amazon's India head Amit Agarwal addressed the story, saying he understood "such instances can be distracting."

The company was on "the threshold of creating a legacy," he wrote in the e-mail, which was reviewed by Reuters. "It will require significant innovation, it will push our abilities, we will be misunderstood, but it will be fulfilling."

Indian retailers, who are a crucial part of Prime Minister Narendra Modi's support base, have long alleged that e-commerce giants like Amazon and Walmart's Flipkart flout federal regulations and that their business practices hurt small traders. The companies deny the allegations.

The documents reviewed by Reuters revealed that Amazon helped a small number of sellers prosper on its India platform, giving them discounted fees and helping one cut special deals with big tech manufacturers such as Apple. The company has also exercised significant control over the inventory of some of the biggest sellers on Amazon.in, the documents show, even though it says publicly that all sellers operate independently on its platform.

Government rules announced in 2016 required that an e-commerce platform should "not exercise ownership" over sellers' inventory.

Gopal Krishna Agarwal, a national spokesman for Modi's ruling party, said the findings in the Reuters story were "serious" and that "any predatory policy, deep discounting ... will not be tolerated by the government. The party will take a stand on that."

Small businesses are "very important" for the party, he said. "Their concerns will be taken care of."

In a written response to the report published on Wednesday, Amazon said it "does not give preferential treatment to any seller on its marketplace," and that it "treats all sellers in a fair, transparent, and non-discriminatory manner."

A leading group of Indian retailers urged the government to ban the local operations of Amazon and said it was considering taking legal action, after the story was published.

The Confederation of All India Traders, which says it represents 80 million retail stores, said "the shocking revelations" are "sufficient enough to immediately ban operations of Amazon in India."

Amazon did not respond to a request for comment on the trader group's statement.

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