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Commerce Minister Piyush Goyal says Amazon’s $1 billion promised investment not a “great favour” to India

Following Jeff Bezos’ visit to India, Commerce minister Piyush Goyal said that Amazon is not doing India a “great favour” by promising to invest $1 billion into the country, as per NDTV. The Amazon CEO had announced the investment on January 15 and had said that it was meant to digitize micro and small businesses in India. Goyal also said that the Competition Commission of India’s probe into Amazon for anti-competitive practices was a welcome move. Goyal drew the ire of various stakeholders, including the opposition party, for his remarks who argued that India needed to regain investor confidence given the current economic slowdown. A day after his original comments, Goyal said that his remarks were being taken out of context and that he welcomed investments as long as they followed the laws and regulations properly.

Apart from the $1 billion investment, Jeff Bezos had also announced a series of new commitments in India that ranged from elimination of single-use plastic to an addition of 10,000 electric rickshaws to the delivery fleet. He claimed that his investments will create an additional 1 million jobs in the country by 2025.

Amazon in troubled waters

Opposition from small traders: Jeff Bezos’ visit to India was marked by protests and opposition from groups of small business owners and members of the Confederation of All India Traders (CAIT), reported CNBC. They were demonstrating against alleged unfair practices such as predatory pricing or deep discounting employed by Amazon, which they claim hurts small businesses. While the CAIT had claimed that it was preparing for protests across 300 cities, Reuters reported that the protests were relatively small. As per Reuters, there were protests in Delhi and Eastern Odisha with around 50 demonstrators at each.

Khandelwal had also written a letter to the Prime Minister on January 9, requesting a meeting with him and reinforcing previously made claims about malpractices of E-commerce giants like Amazon and Flipkart that are causing harm to small traders across the country.

Ongoing probe: On January 13, the CCI ordered an investigation into “alleged competition law violations” by Amazon and Flipkart, reported Hindustan Times. The CCI will be investigating four alleged violations such as the exclusive launch of mobile phones, preferred sellers on the platforms, deep discounting and preferential promotion of private labels.

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E-commerce’s frequent clashes with traders

  • In the first week of December 2019, CAIT had written a letter to Prime Minister Narendra Modi, requesting the government to intervene given the “unethical & unfair business practices” of online retailers like Amazon and Flipkart that flout FDI norms. The letter had called out practices such as “deep discount[ing], indulging into predatory pricing, controlling inventory, having exclusivity of products, maintaining preferential seller system”.
  • In September 2019, the organization had requested then Finance Minister Piyush Goyal to investigate and place a blanket ban on festival sales by e-commerce companies for indulging in “predatory pricing” and “deep discounting”.
  • At a panel discussion organised by the CCI in August on the impact of e-commerce on small and medium retailers, Amazon and CAIT clashed over Amazon’s allegedly unfair business practices. While Amazon claimed how it had helped remotely located craftsmen sell their products to a wider audience, CAIT held that the strategy of deep discounting and predatory pricing is harmful to small traders.

RSS affiliate Swadeshi Jagran Manch (SJM) has also, in the past, expressed concerns over certain practices employed by e-commerce websites. In January 2019, they had passed a resolution asking for an e-commerce policy that will lean towards small retail traders and protect their interests. In the same meeting, they held that:

  • Ecommerce giants like Flipkart and Amazon are flouting laws causing damage to the livelihoods of offline traders.
  • Offline retail trade has suffered job losses due to “indiscriminate discounting” and “predatory pricing” policies (cash-burning model) by e-commerce companies
  • The government’s new FDI policy should prevent these companies from having sellers in which they have stakes (Cloudtail which accounts for 70-80% of total sales for Amazon, and WS Retail which pulls 30-40% of total sales for Flipkart, for example), but Amazon and Flipkart continued to sell via these sellers.
  • The organisation called for e-commerce companies to be “dealt with according to law.”

Amazon has dismissed allegations of predatory pricing and deep discounting in the past and claims that it is a pure marketplace and that sellers have the flexibility to set their own prices.

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