Wednesday, Jul 06, 2022
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Why Competition Commission Of India Is Investigating Amazon

The development comes at the backdrop of several offline sellers alleging Amazon monopolizes the market and engages in anti-trust activities

Amazon.
Amazon.

On Friday, the competition commission of India (CCI) raided several offices of India’s largest online retailer, including the Amazon-owned Cloudtail as well as Appario Retail, which is a joint venture between the US e-commerce giant and the Patni group. The development comes at the backdrop of several offline sellers alleging Amazon monopolizes the market and engages in anti-trust activities. However, this is not the first time CCI launched an investigation against the e-commerce giant. 

In 2020, the CCI launched an investigation against Amazon and Walmart-backed Flipkart—the country’s other largest online marketplace, after several offline sellers complained that the two companies favor and promote ‘alpha sellers’ on their platforms. In the online retail world, alpha sellers is a term used for companies that have close relations with the online marketplaces. However, in March this year, it dropped the investigation against Amazon citing that “If the e-commerce giant or any of its related entities’ conduct is not found to be in consonance with the Competition Act, 2002, or if the submissions are found to be incorrect, then the order will not come in the way, in examining the conduct of the entity, either past, present or future.” 

Notably, the parliamentary panel has also summoned representatives of Google, Amazon, Facebook, Twitter, and others to examine their competitive behavior on May 12, after CCI told the panel that it was setting up a 'Digital Markets and Data Unit' for effectively dealing with the anti-competition practices of big tech companies. CCI also aims to bring a new bill to amend the CCI Act.

Violation Of Internal Data And Strategy To Dodge Indian Regulators By Amazon

In October last year, a series of investigations conducted by media outlet Reuters revealed Amazon’s strategy to manipulate the online market in India. After analyzing the company's documents the report highlighted Amazon cunningly exploited the internal data of products, and customers by other sellers on its platform, and promoted its own merchandise using the data at the expense of other sellers by manipulating the search results on the platform to promote its own products. 

The report also revealed the e-commerce retailer’s strategy to dodge investigations by Indian regulators. The report said, “For years, Amazon has been giving preferential treatment to a small group of sellers on its India platform, publicly misrepresented its ties with the sellers, and used them to circumvent increasingly tough regulatory restrictions here.” It also said that Amazon helped only a few sellers to prosper by giving them discounted fees and helping them to bag special deals with big tech manufacturers such as Apple Inc.

According to the report, “The company has exercised significant control over the inventory of some of the biggest sellers on Amazon.in, even though it says publicly that all sellers operate independently on its platform.”

Amazon’s Portfolio In India

Amazon, which is owned by Jeff Bezos, entered the Indian marketplace in 2013 committing to invest $2 billion in the country. Since then, it has grown in the country 10-fold. Experts say that India, with its 1.3 billion population, is a lucrative market for Amazon. Over the years, Amazon has diversified its portfolio. Entering the food delivery space it launched Amazon Prime Now in 2018, and Amazon Fresh in 2019. It also entered the OTT space by launching Amazon Video and UPI payment platform, Amazon Pay Balance. In 2018, Amazon launched Amazon Prime Music in India. The same year, Amazon teamed up with Samara Capital to acquire Aditya Birla’s grocery retail chain worth Rs 4,050 crore. In 2019, Amazon opened its largest campus in Hyderabad, and in 2020, the e-commerce company invested $1 Billion in Small and Medium Businesses (SMBs) across India. It has also committed to delivering a fleet of 10,000 electric vehicles by 2025. 

However, Amazon's biggest bet in India has been the country's retail market. Jeff Bezo's Amazon has been eyeing India’s retail market for years. This puts Amazon into direct competition with the likes of Mukesh Ambani-led Reliance Industries, and Tata Group amongst others. 

In 2019, Amazon bought a 49 per cent stake in Future Coupons worth Rs 1,500 crore—the promoter of Future Group—which in the pre-pandemic world was helmed as the largest retail chain in the country. However, since 2020 the US e-commerce giant has been fighting foot-and-nail legally with Future Group alleging the latter of violating its 2019 deal by entering into a partnership with Reliance Industries. Recently, after Future Group’s creditors showed a thumbs down for the Future-Reliance deal, the Reliance Industries backed away from the deal, but with taking over 800 Future stores. Experts said that as Reliance Industries walked away with 800 Future stores, it reduces the prospects of Amazon in the Indian retail sector. 

 Countries Where Amazon Is Facing Investigation

Amazon is currently facing investigations in the USA and Europe. In March, the US House Committee had asked the Department of Justice to launch a criminal investigation against Amazon alleging that the company refused to hand over data about its third-party sellers. The committee also alleged that Amazon ranks its own products higher to advance sales. 

Lina Khan who is the new chair of the U.S. Federal Trade Commission had first raised her concerns about Amazon’s anti-competitive behavior in 2017. Khan said in her paper, “It is third-party sellers who bear the initial costs and uncertainties when introducing new products; by merely spotting them, Amazon gets to sell products only once their success has been tested. The anti-competitive implications here seem clear.”

The European Commission in April also opened a formal antitrust investigation to assess whether Amazon’s use of sensitive data from independent retailers who sell on its marketplace is in breach of EU competition rules, according to the press release. 

Other Companies Probed By CCI

Apart from Amazon and Flipkart, CCI has also launched a probe against Google and Facebook and food delivery partners Zomato and Swiggy, for alleged malpractices while dealing with respect to restaurant partners. 

What Happens If Amazon Is Found Guilty

Experts say that if Amazon is found guilty it will be either subjected to heavy fine worth billions, or restrictions will be imposed by the regulator. Ryan Gerard Wilson earlier told The Quint, “The law does not bind the CCI to the report, but regulators don't typically deviate from the findings of an investigative mission led by an internal expert, and "the CCI is no different in this regard".  

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