Contradicting earlier reports that claimed Amazon paid a whopping ₹8,546 crores ($1.2 billion) in legal fees in India during 2019 and 2020, the company said that it merely paid ₹52 crores for the fiscal year ending March 2020. The company issued this clarification in a letter dated September 28 to commerce minister Piyush Goyal, seen by The Hindu.
The e-commerce giant’s legal expense figure was thrown into the spotlight after The Morning Context on September 20 reported that Amazon is investigating a whistleblower complaint alleging that the money paid by the company in legal fees was funneled into bribes to government officials by its legal representatives in India. Although this news report did not provide any figures, it prompted other media outlets to unearth the legal fee expenses from public filings made by the company.
The next day, two unnamed government officials told Hindustan Times that the government is examining the issue and the appropriate agency will investigate if necessary. “The abnormally high expenditure as legal fee certainly raises doubts, especially when the government has received written complaints from various people, including association of the local retailers,” one of the officials told HT.
Soon after, Amazon confirmed that it will investigate the bribery allegation but said that the legal expense figure reported by media was inaccurate because it included fees paid by an entity that is not a subsidiary of the company and it was computed from a line item in the public account filings made by the company that included substantial non-legal expenses such as customer research, merchant onboarding services, customer service cost, outsourcing, tax consultants, logistic support services, etc.
Amazon faces CCI investigation and new e-commerce rules
The bribery allegations come at a time when Amazon is facing an investigation by the Competition Commission of India (CCI) into anti-competitive practices and the government is looking to tighten its noose on the company with new e-commerce rules.
After nearly a year of legal back and forth, the Supreme Court last month dismissed pleas by Amazon and Flipkart to stop the investigation by the CCI. “Big companies wield a lot of power owing to large amounts of money with them, they are trying their best to maintain their free will in the e-commerce market. To hurt our small business and traders. And after a while, it causes harm to our consumers in the long term,” commerce minister Piyush Goyal said in response to the verdict.
The CCI’s probe against Amazon and Flipkart was ordered to investigate four alleged violations:
- Exclusive launch of mobile phones
- Promoting preferred sellers on their websites
- Deep discounting practices
- Prioritizing some seller listings over others
Even before the investigation resumed, the government on June 21 proposed amendments that give the existing Consumer Protection (E-Commerce) Rules, 2020 more teeth and address a lot of the concerns that the CCI is investigating. The proposed changes, which were made in response to repeated complaints against Amazon and Flipkart, include new rules to address abuse of FDI regulations, the establishment of a grievance redressal mechanism, new display and labeling criteria for foreign goods, the prohibition of flash sales, introduction of fallback liability, among other things.
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