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CAIT wants government to ban e-commerce app Shopee owned by Free Fire parent Sea Limited

Adding Shopee to the list of apps banned in India would spell deep trouble for Sea whose stock has plummeted.

shopee

A day after the Indian government banned 54 apps linked to China, the Confederation of All India Traders (CAIT) on February 15 issued a press release calling for the government to also ban the e-commerce app Shopee.

Shopee is owned by Sea Limited, the same company that also owns Garena Free Fire, a popular battle royale game that features in the list of apps that were banned by the government.

“The sovereign integrity and security of India is paramount and by banning these Chinese Apps, India has sent a clear message to the world that it will not be subjected to the economic terrorism of Beijing.” – CAIT

The government is yet to release an official notice of the ban and the list of apps that were banned, but Google confirmed to multiple media outlets including MediaNama that it received an order to ban certain apps under Section 69A of the IT Act 2000. MediaNama has also verified that the apps in the ban list circulating in the media are no longer accessible in Google Play Store and Apple App Store in India.

Why CAIT wants the government to ban Shopee

  1. Chinese connection of Sea Limited: CAIT alleged that even though Sea Limited is Singapore-based, it is controlled by its Chinese founder Forest Li (who recently became a Singaporean national) and Tencent; and that Garena and Shopee store all of their data on Tencent Cloud. It is true that Tencent owns an 18.7 % stake in Sea, but Sea recently said that it does not transfer or store any data of its Indian users in China.
  2. Sea violated investment rules of Press Note 3: In April 2020, the government issued Press Note 3, which mandated prior approval of the Government of India for any investment made in India by an entity of a country sharing a land border with India or where the beneficial owner of an investment in India is situated in a land bordering country. This was seen as an indirect restriction on Chinese investments because of the border tension between India and China at the time. CAIT alleged that Shopee violated Press Note 3 by incorporating a company called SPPIN India Private Limited in India and launching its operations. However, it is not clear if Shopee needed permission from the government because Sea is still a Singapore-based company and Tencent is only one of its many shareholders.

“In this background, it is imperative that your good offices take emergent steps to (i) ban the Shopee app from Google Play Store and App Store; and (i) launch investigation into the affairs of the company, SPPIN India and take appropriate action in accordance with law for having investors of Chinese origin without seeking prior permission from the Government.” – CAIT

Garena Free Fire: An interesting case

Garena Free Fire is one of the most-downloaded games in both Google Play Store and Apple App Store, and when it disappeared from both the app stores over the weekend, it wasn’t certain if it was because of a government ban or if it was because of the copyright lawsuit PUBG maker Krafton filed against the company. In its lawsuit, Krafton has asked Google and Apple to remove the app. Many initially believed that it was the lawsuit until the list of banned apps started circulating Monday morning. But even now, without an official list from the government of India, it is not certain.

Another interesting aspect of Free Fire is that it might have been blocked under IT Rules provision 9(1) and not Section 69A. Free Fire was originally developed by a small Vietnamese studio called 111dots Studio, which was acquired by Sea Limited in 2017.

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Why Shopee ban might be a bigger deal for Sea

Despite Free Fire having more than half of its global users in India, Sea Limited earned little in revenue from its Indian players. But even so, the shares of the company plunged 18% on Monday in New York after news of the ban, wiping off more than $16 billion from the company’s market value.

Shopee, on the other hand, is a bigger revenue generator for Sea, accounting for more than half its revenues in the third quarter of 2021. The e-commerce app is popular in India and does about 3-3.5 lakh orders per day, according to CAIT. A ban of Shopee could deal a much bigger blow to Sea from a financial point of view than Free Fire.

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