Amazon and Cloudtail Part Ways Amid Allegations of Favoritism

Amazon, the US-based e-commerce giant, and Cloudtail India, one of its prominent sellers in India, are set to terminate their partnership and not renew their contract after May 19, 2022, culminating a seven-year collaboration. Cloudtail India was established through a joint venture between Amazon and Indian billionaire N.R. Narayana Murthy, co-founder of Infosys, under the banner of Prione Business Services in August 2014.

Allegations and Regulatory Scrutiny

The decision to end ties between Amazon and Cloudtail comes amidst mounting allegations of preferential treatment extended by Amazon towards sellers in which it holds a stake, including Cloudtail and Appario. Although Amazon has vehemently refuted these claims, labeling them as unsubstantiated and factually incorrect, regulatory authorities have taken notice. The Competition Commission of India (CCI) initiated an investigation into Amazon and Walmart-owned Flipkart last year, citing concerns over the alleged promotion of select sellers and anti-competitive business practices.

Impact on Amazon’s Operations in India

Cloudtail has been a significant player in the Amazon India marketplace, particularly in categories such as smartphones, electronics, and fashion. However, India’s stringent regulations on foreign direct investment (FDI) in retail impose restrictions on companies like Amazon from selling items directly to consumers. Consequently, they operate through joint ventures with local entities to navigate regulatory constraints and expand their market presence.

Media Investigations and Regulatory Response

A Reuters investigation in February shed light on Amazon’s deep involvement in Cloudtail’s operations, despite publicly portraying it as an independent seller on its marketplace website. Internal company documents revealed Amazon’s active role in expanding Cloudtail and utilizing it, alongside other sellers, to circumvent India’s foreign investment laws. Moreover, the report uncovered instances where Amazon provided discounted fees to Cloudtail and another seller named Appario.

Future Prospects and Ongoing Negotiations

As the termination of ties between Amazon and Cloudtail looms, attention turns to the future of Amazon’s partnerships with sellers in India. Discussions are reportedly underway between Amazon and the parent company of Appario to determine the fate of their joint venture agreement. Meanwhile, inquiries have been directed to Amazon India for comments on the matter, with updates expected pending their response.

In conclusion, the decision to end the partnership between Amazon and Cloudtail underscores the complexities of operating within India’s regulatory landscape. While allegations of favoritism and regulatory scrutiny pose challenges, they also reflect the evolving dynamics of e-commerce regulation in India. As stakeholders await further developments, the outcome of ongoing negotiations and regulatory investigations will shape the future trajectory of e-commerce operations in the country.