Amazon India and the parent company of Cloudtail, the largest seller on the Amazon.in platform, will not continue with their seven-year-old joint venture when it comes up for renewal in May next year. The announcement by the US e-commerce giant came hours after the Supreme Court on Monday refused to halt antitrust probes against the country’s largest e-commerce players, Amazon and Flipkart.
Cloudtail’s parent, Prione Business Services, is jointly owned by Catamaran, led by Infosys founder NR Narayana Murthy and Amazon. Catamaran, which originally held 51% in the JV, raised its stake to 76% in 2019 following the government’s Press Note 2 notification a year earlier. The provisions in the note prohibited online marketplaces such as Walmart-owned Flipkart and Amazon from allowing their group companies to sell on the platforms.
“The two partners today announced they have mutually decided to not continue their joint venture beyond the end of its current term,” Amazon and Catamaran said in a joint statement on Monday.
Media outfit, Press Note 2 followed allegations by local trade bodies that large company-owned sellers on the ecommerce platforms – such as Cloudtail on Amazon and WS Retail on Flipkart – indulged in deep discounting and did a lion’s share of the business, while smaller sellers were becoming the victims of such anti-competitive practices.
Last year, the country’s antitrust watchdog, the Competition Commission of India (CCI), also ordered a probe against Amazon and Flipkart, acting on complaints by Delhi Vyapar Mahasangh, a body representing small sellers. The companies moved the Supreme Court against the CCI probe, denying any wrongdoing.
Amazon’s move to end its partnership with Catamaran comes as the industry grapples with tougher draft e-commerce rules released by the consumer affairs ministry in June that seek to regulate flash sales and rein in errant online marketplaces from manipulating search results on their platforms to promote certain sellers.
Amazon, which has stakes in other vendors on its platform such as Appario Retail, a JV with the Patni Group, did not disclose the reason for its ending the partnership with Catamaran.
Spokesperson for traders’ body Confederation of All India Traders, Praveen Khandelwal, however, said, “It is now a cover-up exercise by Mr Murthy. The fact that Amazon is violating the law and FDI policy through Cloudtail must have been known to Mr Murthy long before or even at the time of entering into an agreement with Amazon.”
Cloudtail reported a 27.7% increase in its revenue to Rs 11,413 crore in 2020-21, compared to Rs 8,945 crore in the year before. Cloudtail paid about 9% (Rs 980 crore) of its revenue as a platform selling fee for the year ended March 2020, and about 4% in the year ended March 2018. While the jump in commission is significant, it is still less than the average commission of around 25% which independent third-party sellers pay to sell goods on the platform.
Global senior VP and country head – Amazon India, Amit Agarwal said: “Amazon and Catamaran entered into a JV in the early days of e-commerce in India with a shared vision of transforming hundreds of thousands of small businesses in a fast-changing digital world, by providing online capabilities enabling them to access customers both in India and globally. We are humbled by how the JV exceeded its vision, helping online commerce evolve through the unrelenting efforts of hundreds of its employees, positively impacting over 4.3 million small businesses, creating hundreds of thousands of jobs, and contributing to India’s digital economy.”
President of Catamaran, M D Ranganath said: “We are happy that Prione has leveraged global best practices for e-commerce in India, created jobs, and provided millions of Indian customers access to a wide selection of products from across the country by leveraging technology. As our JV with Amazon reaches the end of its tenure, I reflect on this successful partnership that introduced the power of digitisation and empowered hundreds of thousands of SMBs across big and small towns. We would like to thank Amazon for the partnership that leaves behind a strong legacy of shaping e-commerce in India.”