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Amazon headed for trouble in India over FDI rules

Amazon headed for trouble in India over FDI rules

US retail giant Amazon appears to be headed for deeper trouble with Indian regulators as a Reuters report based on internal documents of the company reveals that it misrepresented its ties with sellers and used them to circumvent the country’s foreign direct investment (FDI) rules.

“The documents, dated between 2012 and 2019,  provide 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,’’ the report states.

The documents reveal that the American e-commerce giant helped a small number of sellers prosper and gave them discounted fees, using them to bypass India’s regulatory restrictions on foreign investment aimed at protecting small traders.

Some 33 Amazon sellers accounted for about a third of the value of all goods sold on the company’s website in early 2019, the documents show. Another two big sellers, in which Amazon had indirect equity stakes, accounted for around 35% of the platform’s sales revenue in early 2019.

Amazon 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.

However, in a written statement, Amazon said that it “has always complied with the law” in India and that “as government policies have continued to evolve, we have consistently made the necessary changes to ensure compliance at all times.”

Local traders seek ban

A leading group of Indian retailers have now urged the government to ban the local operations of Amazon.com Inc as it has for years given preferential treatment to a small group of sellers on its India platform and used them to circumvent the country’s strict foreign investment regulations.

In a statement, the Confederation of All India Traders (CAIT), which says it represents 80 million retail stores in India, said “the shocking revelations” in the Reuters story are “sufficient enough to immediately ban operations of Amazon in India.”

The group called on Commerce Minister Piyush Goyal to take immediate note of this “important and burning issue and order for a ban on operations of Amazon in India.”

Shortly after CAIT issued its call for the ban, Amazon retweeted the Reuters report, criticizing it as “unsubstantiated, incomplete, factually incorrect,” without going into specifics. It added that “Amazon remains compliant with Indian laws.”