Amazon is disbanding a controversial joint venture in India with billionaire Narayana Murthy, a potential setback for the e-commerce company as the country’s online market is projected to surge to $1 trillion.
The seven-year-old joint venture – Prione Business Services – will cease operating from the middle of 2022, the companies said on Monday.
The business, which began by helping merchants to go online to sell their wares before it became a dominant vendor itself, is owned by Jeff Bezos’s Seattle-based company and Catamaran Ventures, the private investment firm of Infosys co-founder Murthy.
The partners have “mutually decided to not continue their joint venture beyond the end of its current term”, they said in a statement.
Prione has helped more than 300,000 sellers and entrepreneurs to go online and enabled four million merchants with digital payment capabilities, they said.
Amazon has been criticised in India for business practices that small retailers contend are unfair and illegal.
The Competition Commission of India started an investigation last year into the company and Walmart-owned Flipkart after local retailers alleged they abused their dominance through deep discounts, exclusive tie-ups and favourable support for certain vendors.
On Monday, India’s Supreme Court rejected petitions by Amazon and Flipkart to stop the action, ruling that the antitrust investigation could proceed.
That adds to mounting pressures on Amazon and Mr Murthy, who turns 75 this month, to end their collaboration, which has been criticised for violating the spirit of India’s e-commerce laws.
“We expect big giants like Amazon, Flipkart volunteering for inquiry and transparency and you don’t even want it,” Chief Justice N V Ramana said in the ruling. “Inquiry has to be permitted.”
Prione was set up in 2014, a year after Amazon began selling in India, with the US retailer owning 49 per cent and Catamaran Ventures holding 51 per cent.
The idea was to train and take the Amazon platform to new-to-online merchants, including local shops such as 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 preferential treatment.
Cloudtail was vendor of more than a third of the goods sold on Amazon 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 of 2019, Amazon lowered its stake in Prione to 24 per cent, while Catamaran Ventures 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 less than a fourth of all goods sold by Amazon. Both the companies insisted that they are fully compliant with the law. In recent months, trade groups representing millions of small retailers demanded that India’s Commerce Ministry tighten the rules again.
When Mr Bezos visited India in 2020, owners of small stores demonstrated outside the venue where he was speaking with “Amazon Go Back” signs.
In July, the Indian Sellers Collective, which represents small seller groups, called on Mr Murthy to end the partnership with Amazon. In their letter, which was reviewed by Bloomberg News, the billionaire was accused of hurting the interests of his country.
“Mr Murthy has been in cahoots with Amazon through a name-lending arrangement with Cloudtail acting as a front for Amazon’s retail business and defied the objectives of the policies of the Government of India,” the organisation wrote.
“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.”