Billionaire Jeff Bezos And Narayana Murthy To Discontinue Controversial E-Commerce Joint Venture

E-commerce giant Amazon.com Inc. is ending a controversial joint venture with Indian billionaire Narayana Murthy, a potential setback for the American company as the country's online industry is expected to grow to $1 trillion by 2020. It was announced on 9 August that the 7-year-old joint venture Prione Business Services Pvt. will stop operations in mid-2022.

Jeff Bezos' Amazon and Catamaran Ventures LLP, the private investment firm of Infosys, co-founder Murthy, own the Prione Business Services Pvt., which started by helping merchants come online to sell their wares before becoming a prominent seller itself.

As reported, the owner of the joint venture stated that the partners have agreed to discontinue the business beyond the end of its current term. They also said that the joint venture has enabled over 300,000 retailers and entrepreneurs to go online, as well as 4 million merchants to accept digital payments.

Prione was founded in 2014, a year after Amazon began selling in India, with Amazon owning 49 per cent of the company and Catamaran Ventures controlling 51 per cent.

The goal was to train and bring on new-to-online merchants, such as weavers and women-led businesses, to the Amazon platform. They were taught how to photograph and classify their products, write correct descriptions, and provide customer service, among other things.

The controversy started after the joint venture established Cloudtail, a wholly-owned subsidiary that sold goods online alongside the independent stores. It evolved to be one of Amazon's biggest sellers, establishing deals with high-end brands like Apple and OnePlus, in part due to what smaller merchants claimed was preferential treatment.

Just two years ago, Cloudtail sold almost a third of the items offered on Amazon.

However, India later revised its policies to prohibit online platforms like Amazon from selling affiliate products or favouring connected businesses.

Eventually, Amazon reduced its interest in Prione to 24 per cent in February 2019, while Catamaran Ventures increased its position to 76 per cent. The Confederation of All India Traders (CAIT), which represents small shopkeepers, claimed that the reorganisation was a clever strategy to get around the new laws.

Both companies claim to be fully compliant with the law. Cloudtail now sells less than a fourth of all Amazon products.

Trade groups representing millions of small merchants have asked that India's commerce ministry tighten the restrictions even more in recent months. When Amazon CEO Jeff Bezos visited India in early 2020, enraged small business owners held "Amazon Go Back" placards outside the venue where he was speaking.

In a letter written to Murthy, the Indian Sellers Collective, which represents small seller groups, urged him to end the collaboration with Amazon and accused the billionaire of harming his own country's interests.

According to Bloomberg, the letter reads: "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. 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."

Amazon has made significant investments in India, which has a billion or more potential internet buyers and a rapidly rising economy. Bezos, during his visit, said that the business would invest an additional $1 billion on top of a previous $5.5 billion commitment.

On the other hand, Walmart outdid itself in terms of investment, first acquiring Flipkart for $16 billion and then pumping billions more into the company to accelerate its expansion. But both the companies—Amazon and Flipkart—are now under investigation in India.

After local retailers said the e-commerce giants exploited their supremacy through low discounts, exclusive tie-ups and advantageous backing of specific vendors, the Competition Commission of India launched an investigation into Amazon and Walmart-owned Flipkart in 2020.

As the Supreme Court on 9 August denied to interfere with a Karnataka High Court judgement which refused to put an injunction into the investigation, CCI will continue the probe. The two-judge Bench also stated that it found no grounds to overturn the HC order, although it did give the companies another four weeks to respond to the probe.

Following the Supreme Court's judgement, Amazon and Flipkart announced that they will cooperate fully with the CCI investigation.