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E-commerce: A tale featuring Amazon, Elizabeth Warren, Indian retail, and GOI
The report, based on the review of thousands of pages of internal Amazon said that “the company ran a systematic campaign of creating knockoffs and manipulating search results to boost its own product lines in India”
New Delhi: United States (US) Senator and a leading voice of the Democratic Party on the hill in Washington, Elizabeth Warren, on Thursday, said what representatives of 80 million small traders and kirana stores of India have been saying about global e-commerce giants.
Quoting a Reuters report, Warren said in a tweet: “These documents show what we feared about Amazon’s monopoly power—that the company is willing and able to rig its platform to benefit its bottom line while stiffing small businesses and entrepreneurs. This is one of the many reasons we need to break it up.”
She was reacting to the report, published on Wednesday, which claimed that Amazon “copied products and rigged search results” to promote its own brands.
“A trove of internal Amazon documents reveals how the e-commerce giant ran a systematic campaign of creating knockoff goods and manipulating search results to boost its own product lines in India - practices it has denied engaging in,” Reuters said.
The allegation
The report, based on the review of thousands of pages of internal Amazon documents – including emails, strategy papers and business plans – said that “the company ran a systematic campaign of creating knockoffs and manipulating search results to boost its own product lines in India”, one of its largest growth markets.
Indian traders reacted immediately, demanding a Central Bureau of Investigation (CBI) enquiry. In a statement issued same day, the Confederation of All India Traders (CAIT) said the Reuters’ report “has corroborated the charges reiterated by CAIT from 2019 against Amazon & Flipkart”, and asked the government to probe alleged bribes paid by Amazon to Indian government officials through its internal and external legal advisers.
The Union government is already investigating the unusual expenditure by the company. Hindustan Times, on September 21, wrote that the government was examining preliminary details of “abnormally” high legal expenditures by e-commerce giant Amazon India in two financial years (2018-19 and 2019-20), which amounts to ₹8,546 crore.
Amazon’s defence
On Senator Warren’s tweet and Reuters’ report, an Amazon spokesperson on Saturday said that the allegations were “incorrect and unsubstantiated”.
“Amazon does not give preferential treatment to any seller on its marketplace – all sellers determine and control pricing for their products, and independently manage their own inventory including for private brands, which are sold by independent sellers on our marketplace. We have a policy that strictly prohibits the use or sharing of non-public, seller-specific data with sellers, including with sellers of private brands,” the spokesperson said in an email reply to HT.
The spokesperson added that the above mentioned policy applies uniformly across the company. The company said its “internal teams receive regular trainings on its application, and we thoroughly investigate any reports of employees acting contrary to this policy.”
“Finally, we display search results based on relevance to the customers, irrespective of whether such products are private brands offered by sellers or not. We remain committed to enabling success for all kinds of sellers as they collectively improve the selection for customers on Amazon.in, regardless of whether they sell private brands or otherwise,” the email reply said.
On the allegations of bribing government officials via legal professions, an Amazon spokesperson on September 21 said: “Given a misleading representation of a line item from our statutory filings on legal fees in a section of the media, we clarify that the line item is actually termed legal and professional expenses that includes not just the legal costs but also the costs related to other professional services such as outsourcing, tax consultants, customer research, logistic support services, merchant onboarding services, customer service cost, etc. For instance, for the year ended March 31,2020, the legal fee was INR 52 Cr, from the total legal and professional expenses of INR 1967 Cr.”
The other multinational e-commerce giant Flipkart did not respond to email queries on these matters. An external spokesperson of Flipkart said the company did not want to comment. Email queries sent to ministries of commerce and consumer affairs did not elicit any response.
The government’s investigation
Two government officials, requesting anonymity, said that ministries of commerce and consumer affairs have received several complaints from local traders and retailers against marketplace e-commerce entities for allegedly indulging in deep discounting, predatory pricing and misuse of market dominance.
“Relevant government agencies are investigating the matter,” the first official said.
“The Competition Commission of India (CCI) is also probing anti-competitive practices of e-commerce companies and abuse of their dominant position to hurt small retailers,” the second person said.
Meanwhile, to strengthen the regulatory framework for preventing unfair trade practices in e-commerce, including flash sales, the department of consumer affairs is considering amendments to the e-commerce rules. While the Consumer Protection (e-Commerce) Rules, 2020 were notified on July 23, 2020, the government is taking steps to strengthen it further to check malpractices by dominant e-commerce players, the officials said.
The debate within
The draft amendments to e-commerce rules, proposed by the department of consumer affairs, however, raised concerns within the government.
The Niti Aayog reportedly said matters related to law enforcement, competition, liability of the intermediary and personal data protection is not within the ambit of the department of consumer affairs, and these issues should be handled by the respective ministries. The Niti Aayog proposed to adopt a balanced approach keeping investors’ sentiment into the account. Other arms of government, such as the department for promotion of industry and internal trade (DPIIT) and the ministry of corporate affairs, held similar views.
CAIT reacted immediately and sharply to media reports, accusing the Niti Aayog of being “influenced by foreign etailers”, and interfering in the proposed e-commerce rules by the department of consumer affairs.
In a statement on August 28, CAIT secretary general Praveen Khandelwal said, “It is highly unfortunate that Niti Aayog in the last seven years since its inception had done absolutely nothing to support the 8 crore [80 million] traders of India and now when the government is trying to create a level playing field in the retail sector, Niti Aayog is putting its nose in between and trying to derail the process.”
The association demanded that the department of consumer affairs should implement the draft consumer protection e-commerce rules at the earliest for the “sustainable growth for 8 crore [80 million] Indian traders who are the backbone of the economy.”
The search for balance
After Niti Aayog’s views become public, the department of consumer affairs clarified the matter. According to a PTI report on September 7, consumer affairs secretary Leena Nandan said the government will take a “balanced” approach while finalising the amendments proposed to the Consumer Protection (e-commerce) Rules as it received “wide and varied” comments from several stakeholders.
“We have received a lot of suggestions. We will now have to come out with best formulations from the consumer perspective taking into account the wide and varied diverse views received on the draft rules,” the report said, quoting Nandan.
Clarifying the stand, on October 3, Piyush Goyal, Union minister of commerce, industry, consumer affairs and food and public distribution and textiles, told PTI that all stakeholders will be consulted and their views will be considered while finalising the e-commerce rules. Goyal said he would welcome all feedbacks on the draft e-commerce rules which is the purpose of inter-ministerial consultations.
“I do believe that I welcome all the feedback and look forward to a very robust and healthy consultations with all the stakeholders...We are trying to balance everybody’s interest and come up with a robust framework in which this (policy) can be implemented in the interest of all Indians,” the report said quoting Goyal.
