Billionaires Bezos, Murthy to end controversial India venture

Bangalore

AMAZON.COM is disbanding a controversial joint venture in India with billionaire Narayana Murthy, a potential setback for the e-commerce giant as the country's online market is projected to surge to US$1 trillion.

The seven-year-old joint venture, called Prione Business Services Pvt, will cease operating from mid-2022, the companies announced on Monday.

The business, which began by helping merchants get online to sell their wares before becoming a dominant vendor itself, is owned by Jeff Bezos's Seattle-based behemoth and Catamaran Ventures, the private investment firm of Infosys co-founder Mr Murthy.

The partners have "mutually decided to not continue their joint venture beyond the end of its current term", they said in a statement. The JV has enabled over 300,000 sellers and entrepreneurs to go online and enabled four million merchants with digital payment capabilities, they said.

Amazon has come under fire in India for business practices that small retailers contend are unfair and illegal. The Competition Commission of India started a probe last year into the company and Walmart-owned Flipkart after local retailers alleged the giants abused their dominance through deep discounts, exclusive tie-ups and favourable backing of certain vendors.

On Monday, India's Supreme Court rejected petitions by Amazon and Flipkart to halt the probe, ruling that the anti-trust investigation could proceed.

That adds to mounting pressures on Amazon and Mr Murthy, who turns 75 later this month, to end their collaboration, which has been criticised for violating the spirit of India's e-commerce laws.

Prione was set up in 2014, a year after Amazon began selling in India, with the US retailer owning 49 per cent and Catamaran holding 51 per cent. The idea was to train and bring the Amazon platform to new-to-online merchants, including local shops like weavers and women-led start-ups. They were instructed in fundamentals like photographing and cataloguing their products, writing accurate descriptions and providing customer assistance.

More controversially, Prione set up a fully-owned unit called Cloudtail that sold goods online alongside the independent shops. It grew to be one of the largest sellers on Amazon, forging agreements with premium brands like Apple and OnePlus, in part because of what smaller merchants alleged was favourable treatment. Cloudtail vended over a third of the goods sold on Amazon even as recently as two years ago.

India later changed its regulations to bar platforms like Amazon from selling products from affiliates or giving favourable treatment to related businesses.

In February 2019, Amazon lowered its stake in Prione to 24 per cent while Catamaran raised its holding to 76 per cent. The Confederation of All India Traders, a group which represents millions of small retailers, alleged that the restructuring was a creative way to circumvent the new rules. Cloudtail now sells under a fourth of all goods sold by Amazon. Both the companies have insisted that they are fully compliant with the law.

In recent months, trade groups representing millions of small retailers have demanded that India's commerce ministry further tighten the rules. This July, the Indian Sellers Collective, which represents small seller groups, exhorted Mr Murthy in a letter to end the partnership with Amazon.

The letter accused the billionaire of hurting the interests of his own country. "Just for a fixed fee or returns, Mr Murthy has sacrificed the interests and livelihood of millions of small traders in India and left them at the mercy of Amazon," the Indian Sellers Collective wrote. BLOOMBERG