Amazon.com Inc. is ending its contentious joint venture with Indian billionaire Narayana Murthy. This might be a blow for e-commerce giants, as India's online industry is expected to reach $1 trillion by 2020.
The two companies stated on Monday that their seven-year-old joint venture, Prione Business Services Pvt., will stop operations in mid-2022. Jeff Bezos' Seattle-based giant and Catamaran Ventures LLP, the private investment firm of Infosys Ltd. co-founder Mr Murthy, own the company, which began by assisting merchants to get online to sell their items before becoming a major seller itself.
The partners in a statement said that they have "mutually agreed to not continue their joint venture beyond the end of its present term." The JV has empowered over 300,000 sellers and entrepreneurs to go online and provided 4 million merchants with digital payment capabilities, they added.
In India, Amazon has been criticised for business practices that small sellers claim are unfair and unlawful. Local merchants said the giants exploited their dominance through steep discounts, exclusive tie-ups, and advantageous backing of certain vendors following which the Competition Commission of India launched an investigation against the firm and Walmart Inc.-owned Flipkart last year. The Supreme Court of India rejected Amazon and Flipkart's requests to suspend the inquiry on Monday, saying that the antitrust investigation may proceed.
This adds to increasing pressure on Amazon and Mr Murthy to discontinue their partnership, which has been condemned for going against the spirit of India's e-commerce regulations.
In the judgement, Chief Justice N.V. Ramana stated, "We expect big giants like Amazon and Flipkart to volunteer for investigation and transparency, yet you don't even want it." "Inquiry must be permitted."
Prione was founded in 2014, a year after Amazon began selling in India, with Amazon owning 49 per cent of the company and Catamaran Ventures controlling 51 per cent. The goal was to train and bring on new-to-online merchants, such as weavers and women-led businesses, to the Amazon platform. They were taught how to photograph and categorise their items, write correct descriptions, and provide customer service, among other things.
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More controversially, Prione established Cloudtail, a wholly-owned subsidiary that sold products online alongside the independent stores. It evolved to be one of Amazon's biggest sellers, striking deals with high-end companies like Apple and OnePlus, in part due to what smaller merchants claimed was special privileges. Even as late as two years ago, Cloudtail sold almost a third of the items offered on Amazon.
Later, India modified its rules to prohibit sites like Amazon from selling affiliate items or favouring affiliated firms.
Amazon reduced its investment in Prione to 24 per cent in February 2019, while Catamaran Ventures increased its ownership to 76 per cent. The Confederation of All India Traders (CAIT), which represents millions of small retailers, said that the reorganisation was a cunning way to get around the new restrictions. Cloudtail now sells less than a fourth of all Amazon products. Both firms claim to be completely compliant with the law.
Trade organisations representing millions of small shops have urged that India's commerce ministry tighten the regulations even further in recent months. When Amazon CEO Jeff Bezos visited India in early 2020, local store owners protested outside the venue where he was speaking.