New Delhi: News agency Reuters has reported that e-commerce giant Amazon said in an internal document that Prime Minister Narendra Modi “is not an intellectual or an academic” but someone who is known to like “simple, logical, straight forward thinking without excessive academic jargon”.
The Reuters report, published on 17 February, cited a collection of Amazon’s internal meeting notes, PowerPoint slides, business reports and emails between 2012 and 2019 to claim that the American firm had a “secret strategy to dodge India’s regulators”.
A 2014 document cited in the investigative report showed talking points for Amazon chief Jeff Bezos’ meet with PM Modi in New Delhi in October that year. This document included an analysis of PM Modi, which said: “PM Modi is not an intellectual or an academic but believes that strong administration and governance is the key to running a successful government… He is known to like simple, logical, straight forward thinking without excessive academic jargon.”
The report went on to say that Reuters had asked Amazon for a comment on this description of Modi, and that “Amazon said it was committed to the prime minister’s vision for India’s digital economy and believes it can help by getting 10 million medium and small businesses online, among other steps”.
Other documents cited in the report showed that only a handful of sellers command a major portion of business on Amazon.
For example, in early 2019, only around 35 of the 4 lakh sellers on the platform in India accounted for approximately two-thirds of the sales. Two sellers — Cloudtail and Appario — in which Amazon has indirect stakes “accounted for around 35 per cent of the platform’s sales revenue”, the report said.
It went on to allege that “for years”, Amazon has been providing preferential treatment to only a small group of sellers, while publicly misrepresenting its ties with sellers and using those misrepresented ties to “circumvent increasingly tough regulatory restrictions” in India.
ThePrint approached Amazon for a comment about the report, and a spokesperson for the company said in an emailed response: “As we have not seen the documents and Reuters has not shared their provenance with us, we cannot confirm the veracity or otherwise of the information and claims stated. However, the article appears to be based on unsubstantiated, incomplete, and/or factually incorrect information, likely supplied (maliciously) with the intention of creating sensation and discrediting Amazon.”
It added: “Amazon remains compliant with all Indian laws. In the last several years, there have been (a) number of changes in regulations governing the marketplaces and Amazon has, on each occasion taken rapid action to ensure compliance. The story therefore seems to have outdated information and does not show any non-compliance. In the meantime, we continue to focus on delivering first class service to India’s consumers, and helping India’s manufacturers and SMBs (small and midsize businesses) reach customers across India and around the world.”
Cloudtail and Appario
The Reuters report explained that the business model that made Amazon the largest online retailer in the world is the ability to sell directly to consumers in countries like the US. However, in India, foreign investment regulations don’t allow e-commerce firms to hold goods inventories and sell them directly to customers.
To “circumvent” this restriction, Amazon had entered into a joint venture with an entity formed by Infosys founder N.R. Narayana Murthy. The joint venture was used to set up a seller named Cloudtail, which started selling on the Amazon India platform in August 2014.
While Amazon has publicly said Cloudtail receives “the same privileges as any of the other sellers on our platform”, documents show Amazon referred to Cloudtail as “SM”, or “Special Merchant”, the report said.
A 2015 Amazon India report allegedly showed the firm aimed to make Cloudtail sales account for 40 per cent of sales on Amazon.in. “Amazon helped Cloudtail ‘acquire key relationships’ with major tech companies, including Apple, Microsoft and OnePlus,” the Reuters report said.
By March 2016, Cloudtail sales accounted for 47 per cent of sales on Amazon.in, the report quoted an internal document as saying.
However, that month, India issued new foreign investment rules that prevented a single online seller from accounting for more than 25 per cent of total sales of an online marketplace. The new rules had also said an e-commerce platform “will not exercise ownership over the inventory” sold on its site.
To deal with the new rules, Amazon said it “will need to move a subset of this selection” of smartphones from Cloudtail “to other sellers”, the Reuters report cited a May 2016 document as saying.
Amazon then moved the procurement of “some mobile phone brands” Cloudtail was offering to Amazon Wholesale, a B2B operation in India that does not come under India’s foreign investment restrictions.
Amazon Wholesale had then supplied products to “certain” sellers who sold them on Amazon.in, Reuters stated.
Amazon’s response to this, according to the report, was: “As government policies have continued to evolve, we have consistently made the necessary changes to ensure compliance at all times…The so-called facts stated here fail to show any non-compliance” with foreign investment rules.
In 2017, the report said, Amazon moved to make a second ‘special merchant’ or ‘SM2’ named Appario. For this, Amazon entered another joint venture with an entity backed by entrepreneur Ashok Patni’s family. Reuters described Patni as a “pioneer” in India’s IT outsourcing sector.
According to the report, a 2019 internal Amazon document said Cloudtail and Appario get “subsidised fees” and “access to Amazon global retail tools”.
Amazon is quoted as saying that its marketplace fees are “uniformly applicable to all like sellers”.
Amazon’s further responses to Reuters
Responding to queries from Reuters, Amazon is quoted as saying it “does not give preferential treatment to any seller on its marketplace” and “has always complied with the law”.
“The reporting appears based on unsubstantiated, incomplete, and/or factually incorrect information, likely supplied (maliciously) with the intention of creating sensation and discrediting Amazon.”
The e-commerce firm added that it “treats all sellers in a fair, transparent, and non-discriminatory manner, with each seller responsible for independently determining prices and managing their inventory”.