A Close Look Into The Damaging Report On Amazon

The report shows how Amazon adopted unfair practices as well as secret strategies to evade India’s regulators.

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A report was released by Reuters, and it has sparked unrest amid small traders in India. So, what did the report say?

Preferential Treatment: Amazon documents show, in 2019, some 33 Amazon sellers accounted for around a third of the value of all goods sold on the company’s website. Other company documents showed that two more sellers on Amazon India’s platform — merchants in which the retail giant had indirect equity stakes — amounted for about 35% of the platform’s sales revenue in early 2019.

Also, the company has helped a few sellers to flourish by providing them discounted fees and helping one make a special deal with large technology manufacturers like Apple Inc. Amazon publicly said that all sellers operate independently on its platform, but the truth was something else. The documents showed that the firm has exercised considerable control over the inventory of some of the biggest sellers on its platform.

This information is very problematic. If it had got out, it would give the Indian retailers, who allege that Amazon is affecting its businesses, proof that the retail giant was indeed harming their businesses.

Circumventing Regulators: One of the meeting note consisted of a frank appraisal of Modi’s “straight forward” style of thinking, sizing him up as “not an intellectual”. Every time the Indian government imposed new restrictions on foreign e-commerce companies, Amazon adjusted its corporate structures all those times.

In one slide in a 2014 presentation, Amazon said, “Test the Boundaries of what is allowed by law” and the slide also gave advice on preparations that has to be made in case of a visit by an enforcement body, saying “Establish a Strong Dawn raid Process”.

Role In Product Pricing: Despite Amazon saying that it had no role in pricing the products that were being sold in India, it lowered the fees it charged some big sellers on its platform, in order to help them provide more competitive prices. One document from 2019 shows that two special merchants — Cloudtail and Appario — get “subsidized fees” and access to Amazon global retail tools. So, Amazon indirectly played a role in pricing the products.

In short, the report showed that Amazon had given preferential treatment to a small group of sellers in India, publicly misrepresented its ties with those sellers and used them to avoid foreign investment rules in the country.

Impact & Response

Once the report became public, the Confederation of All India Traders (CAIT), which claims to represent 80 million retailers and 40,000 trade associations in India, asked the Indian government to ban Amazon in India. Praveen Khandelwal, secretary general of CAIT, told TechCrunch, “It’s an open and shut case that Amazon is wilfully playing with rules. What more we are waiting for. It should be banned in India with immediate effect.”

Shortly after CAIT called for the ban, Amazon tweeted saying, “The story is unsubstantiated, incomplete, factually incorrect. Amazon remains compliant with Indian laws. We haven’t seen the documents & Reuters hasn’t shared provenance to confirm veracity: the details are likely supplied with intent to create sensation & discredit Amazon”. Amazon went on to say, “The story therefore seems to have outdated information and doesn’t show any non-compliance.”

Zooming Out

This report comes at a time when Amazon is having a legal battle with Future Retail to prevent the latter from selling its retail, wholesale, logistics and warehousing businesses to Reliance for $3.8 billion. The latest update on the above story is that Amazon had asked the National Company Law Tribunal (NCLT) to not allow convening of any meeting of Future Group’s shareholders or creditors for approval of the proposed deal.

So, this report couldn’t have come at a worse time than ever for Amazon. Right now, the e-commerce giant has a lot in its plate. It should take measures to assure that it is actually helping India’s small businesses and also, deploy more measures to make its business practices more transparent. At the end of the day, transparency and accountability is what will help big companies like Amazon to remain as a successful company, not partiality or secret strategies.

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