Amazon’s India challenge

Amazon is facing inquiry for anti-competitive practices

Protests greeted Jeff Bezos in his recent visit 

Jeff Bezos, founder and CEO of international retail giant Amazon and richest man of the world visited India in the beginning of January this year. He was hoping to get red carpet reception. He met leading people from showbiz- actors- business people and government officials in a three day visit. He announced to invest one billion dollars ($1 billion) in India to expand its operations. 

  

But contrary to his expectations he was greeted by angry traders and online retailers. He also received the bad news of an inquiry initiated against his company by competition commission of India (CCI) on the allegations of anti competitive behaviour and practices. The small traders organised protests in more than 300 cities against Amazon and Bezos for trying to kill competition from bricks-and-mortar retailers.  

Indian PM Modi and cabinet ministers snubbed him allegedly for “predatory prices or some unfair trade practices”. Commerce Minister Piyush Goyal said that “it is not as if they are doing a favour to India when they invest a billion dollars” if that money is used to take business away from Indian companies.

Bezos’ trip might have concluded, but the dust it kicked up is yet to settle: his company is under investigation and the Indian government appears increasingly hostile. But why is New Delhi taking such a confrontational approach to the retail giant at a time when the country’s economy could use all the help it can get? The answer lies in a curious mix of opaque workings, improper business dealings and political resistance.

                                             

As the world’s fastest growing e-commerce market, India is vital for the likes of Amazon and Walmart, which acquired Flipkart in 2018.  In a study released earlier this month, the CCI forecast that total e-commerce revenue in the country would reach US$120 billion this year, representing annual growth of 51 per cent.

Some 4,757 e-commerce start-ups are vying for their piece of the action, the study showed, but of the more than 1 million online retail transactions that are carried out in India every day, the bulk are handled by either Amazon or Flipkart, which enjoy 31.2 per cent and 31.9 per cent market share, respectively, according to data compiled by financial services company Standard & Poor’s.

As Amazon pursues an ever larger share of the market in India, its journey has been marked by constant allegations of unsavory trade practices, from predatory pricing, to favouritism and conflicts of interest with its positioning of subsidiaries as sellers and brands on its marketplace.

Spearheading the campaign against the US retail giant has been the Confederation of All India Traders (CAIT) – with its 70 million members – and the Swadeshi Jagran Manch, an affiliate of the Rashtriya Swayamsevak Sangh, the Hindu nationalist ideological fountainhead of India’s ruling Bharatiya Janata Party.

Praveen Khandelwal, general secretary of CAIT, said the body was not opposed to e-commerce, but had a problem with the way major players like Amazon and Flipkart had tried to “control and dominate” the market.

Another complaint made against Amazon by trade bodies such as the All India Online Vendors Association (AIOVA) relate to the retail giant’s “private-label brands”, which often undercut the competition on price and are difficult to compete against.

In its report, the CCI said such practices worked “to the disadvantage” of other sellers and service providers as “private labels reportedly are typically showcased as bestsellers to customers”.

There is political side to this cold shoulder shown to Bezos. He is also owner of Washington Post. Washington Post is heavily criticising the policies of Modi government. That newspaper has been fiercely critical of the Indian government’s handling of the recent nationwide protests, which were sparked by an amendment to the citizenship law.

The disdain with which Modi’s party seemingly regards The Washington Post’s coverage can be seen in senior BJP leader Vijay Chauthaiwale reply to Bezos on Twitter when the Amazon CEO praised India’s “dynamism” and “democracy”. “Please tell this to your employees in Washington DC. Otherwise your charm offensive is likely to be [a] waste of time and money,” Chauthaiwale said.

Modi wants to put pressure on the Bezos to stop negative coverage of Modi government. Their message is clear if you want to get excess the Indian market than don’t offend or criticise Modi government in any way.

                                                  Khalid Bhatti