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(Bloomberg) – Amazon.com Inc. is dissolving a controversial joint venture in India with billionaire Narayana Murthy, a potential setback for the e-commerce giant as the country’s online market is expected to grow to $ 1,000 billion. The former joint venture, called Prione Business Services Pvt., Will cease operations from mid-2022, the companies said on Monday. The company, which started out by helping merchants get online to sell their wares before becoming a dominant supplier itself, is owned by Seattle-based giant Jeff Bezos and Catamaran Ventures LLP, the investment firm. from the co-founder of Infosys Ltd. Murthy.
The partners have “mutually decided not to continue their joint venture beyond the end of its current term,” they said in a statement. The joint venture has enabled more than 300,000 sellers and entrepreneurs to connect and 4 million merchants with digital payment capabilities, they said.
Amazon has been criticized in India for business practices that small retailers regard as unfair and illegal. The Indian Competition Commission launched an investigation last year into the company and Flipkart, owned by Walmart Inc., after local retailers alleged the giants had abused their dominance through large discounts, exclusive links and favorable support from certain suppliers. The Indian Supreme Court on Monday dismissed Amazon and Flipkart’s requests to stay the investigation, ruling on Monday that the antitrust investigation could continue.
This comes on top of growing pressure on Amazon and Murthy, who will turn 75 later this month, to end their collaboration, which has been criticized for violating the spirit of India’s e-commerce laws.
“We expect big giants like Amazon, Flipkart to volunteer for investigation and transparency and you don’t even want it,†Chief Justice NV Ramana said in the ruling. “The investigation must be authorized. “
Prione was established in 2014, a year after Amazon started selling in India, with the US retailer holding 49% and Catamaran Ventures 51%. The idea was to train and bring new online merchants to the Amazon platform, including local stores like weavers and women-led startups. They were introduced to fundamentals such as photographing and cataloging their products, writing accurate descriptions and providing customer support.
More controversially, Prione created a wholly owned unit called Cloudtail that sold products online alongside independent stores. He became one of the biggest sellers on Amazon, making deals with high-end brands like Apple and OnePlus, in part because of what smaller traders claimed to be favorable treatment. Cloudtail sold more than a third of the products sold on Amazon just two years ago.
India subsequently changed its regulations to prohibit platforms like Amazon from selling affiliate products or giving favorable treatment to related businesses.
In February 2019, Amazon lowered its stake in Prione to 24%, while Catamaran Ventures increased its stake to 76%. The Confederation of All Indian Traders (CAIT), a group that represents millions of small retailers, said the restructuring was a creative way to get around the new rules. Cloudtail now sells less than a quarter of all products sold by Amazon. Both companies have insisted they fully comply with the law. In recent months, trade groups representing millions of small retailers have demanded that India’s Ministry of Commerce tighten the rules further. When Amazon’s Bezos visited India in early 2020, angry small store owners demonstrated outside the place where he was speaking with “Amazon Go Back” signs. In July, the Indian Sellers Collective, which represents small groups of sellers, urged Murthy in a letter to end the partnership with Amazon. The letter, which was reviewed by Bloomberg News, accused the billionaire of harming the interests of his own country. Murthy has been in cahoots with Amazon via a name-lending agreement with Cloudtail acting as a front for Amazon’s retail business and has defied the policy objectives of the Indian government, â€the Collective wrote. “Just for a fixed fee or returns, Mr. Murthy sacrificed the interests and livelihoods of millions of small traders in India and left them at the mercy of Amazon.”
The term of a similar Amazon joint venture with Pune’s Patni Group also ends in May 2022, but no decision has been made on its continuation. During his visit last year, Bezos promised that the company would invest $ 1 billion in addition to a previous sum of $ 5.5 billion. Rival Walmart outperformed the investment, first acquiring Flipkart for $ 16 billion and then investing billions more to spur its growth.
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