Amazon’s India head is refuting a scathing report from Reuters that alleged that the e-commerce giant had given preferential treatment to a small group of sellers on its platform in the South Asian nation and repeatedly circumvented regulatory restrictions in the market to spur growth.
In an internal letter to Amazon employees obtained by The Times of India and The Economic Times, global senior vice president and country head Amit Agarwal said the Reuters report is “unsubstantiated, incomplete and factually incorrect.”
Agarwal said details of the report “are likely supplied with malicious intent to create sensation and discredit us,” and did not mention in the email who he thinks had “supplied” the information to Reuters.
He said his team has not seen the documents referenced, noting “Reuters hasn’t shared provenance to confirm veracity” of the claims.
The report, which detailed information from several internal documents from 2012 to 2019, highlighted that e-commerce giant had a hand in establishing two “special merchants,” Cloudtail and Appario, which by 2019 represented 35 percent of Amazon India’s online sales. Another 33 Amazon sellers (out of the then-400,000 on the site) accounted for an additional one-third of the value of all goods sold on the platform, suggesting that the narrative that Amazon was prioritizing Indian small businesses was misleading.
“The truth is that we take our responsibilities to our customers and selling partners very seriously. We have made substantial investments to digitize hundreds of thousands of entrepreneurs and businesses, helping them scale nationally and globally,” Agarwal said in the note, alluding to the $1 billion commitment the company made to build 100 digital centers across 100 cities and villages across India. He reiterated that Amazon remains compliant with all local laws.
The regulations that are allegedly being circumvented are foreign direct investment (FDI) rules conceived to deter foreign firms from offering products from sellers in which they have an equity stake. The government is now considering tightening those rules again to include sellers in which a foreign e-commerce firm holds an indirect stake through its parent, which would directly impact Cloudtail and Appario under Amazon.
On the day the report broke, Amazon wrote its own rebuttal to the Reuters allegations that read similarly to Agarwal’s, telling the outlet that it “does not give preferential treatment to any seller on its marketplace” and “has always complied with the law.” The statement used the same terms, including that the report appeared to be based on “unsubstantiated, incomplete and/or factually incorrect information.”
The company added that it “treats all sellers in a fair, transparent and non-discriminatory manner, with each seller responsible for independently determining prices and managing their inventory.”
Brick-and-mortar retailers, which have typically been critical of e-commerce giants such as Amazon and Walmart’s Flipkart and their business practices online, have again reached out to the Indian government citing the alleged policy violations.
One such organization that says it represents 80 million retailers and 40,000 trade associations in India, The Confederation of All India Traders (CAIT), has demanded serious action from the Indian government against Amazon. “For years, CAIT has been maintaining that Amazon has been circumventing FDI laws of India to conduct unfair and unethical trade,” it said.
CAIT has asked India’s commerce minister Piyush Goyal to conduct an investigation into the role Cloudtail, Appario and their joint ventures for knowingly “desecrating our country’s rule of law.” In the letter to Goyal, the organization also alleged that some banks are colluding with Amazon by helping it keep prices lower than the market through exclusive e-commerce-only cashback policies.
The Reuters’ report was published as Amazon continues to fight battles on numerous fronts in India. It has been under investigation by the country’s competition regulator and its economic intelligence agency since last year. U.S. and E.U. lawmakers in the past year have both filed antitrust suits against the e-commerce giant for anticompetitive business practices.
Amazon is also fighting a back-and-forth legal battle to stop top brick-and-mortar player Reliance Industries from paying $3.4 billion for the retail assets of Future Group, in which Amazon has made a $200 million investment. While a Delhi high court blocked the deal, Future Group is likely appealing the court’s decision.
Amazon has since approached Indian corporate judicial body National Company Law Tribunal (NCLT) urging it to block any meeting of Future Group’s shareholders or creditors for approval of the proposed deal.
The e-commerce giant petitioned NCLT to restrain Future Retail from taking any steps to further the deal with Reliance until the final award is granted in an arbitration process in Singapore. When Amazon first invested in Future Retail, the deal specified that any disputes would be arbitrated under Singapore International Arbitration Centre (SIAC) rules.
Earlier this week, Future Retail said that Amazon asked for $40 million in compensation to void its “right of first refusal” in exchange for Future Group and Reliance proceeding with the disputed transaction.