ED to Examine Findings on Amazon's Strategy to Dodge Regulators: Report

Amazon is already under investigation by the ED for possible violation of foreign investment rules.

New Delhi: The Enforcement Directorate (ED) will examine findings in a Reuters report, which revealed that Amazon.com Inc has for years given preferential treatment to a small group of sellers on its India platform and used them to circumvent the country’s foreign investment rules, a senior agency source told Reuters on Thursday.

The Reuters story, which was published Wednesday, was based on internal Amazon documents dated between 2012 and 2019. It provided an inside look at the cat-and-mouse game Amazon has played with India’s government, adjusting its corporate structures each time the government imposed new restrictions aimed at protecting small traders.

On Thursday, a senior ED source told Reuters that “we will be examining findings” of the story. The subject matter “is not entirely new for us,” said the source, without elaborating. The source asked not to be identified.

Amazon didn’t immediately respond to a request for comment.

Amazon is already under investigation by the ED for possible violation of foreign investment rules. Such probes typically take years in India, and in most cases details aren’t made public. In the Reuters report published Wednesday, Amazon said it was confident of its compliance, when asked about the agency’s probe.

In tweets issued on Wednesday, Amazon criticised the Reuters report as “unsubstantiated, incomplete, factually incorrect,” without going into specifics. “In last several years, there have been (a) number of changes in regulations; Amazon has on each occasion taken rapid action to ensure compliance,” the company said.

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In an e-mail to employees on Thursday, Amazon’s India head Amit Agarwal addressed the Reuters story, saying he understood “such instances can be distracting.”

The company was on “the threshold of creating a legacy,” he wrote in the e-mail, which was reviewed by Reuters. “It will require significant innovation, it will push our abilities, we will be misunderstood, but it will be fulfilling.”

Indian retailers, who are a crucial part of Prime Minister Narendra Modi’s support base, have long alleged that e-commerce giants like Amazon and Walmart’s Flipkart flout federal regulations and that their business practices hurt small traders. The companies deny the allegations.

The documents reviewed by Reuters revealed that Amazon helped a small number of sellers prosper on its India platform, giving them discounted fees and helping one cut special deals with big tech manufacturers such as Apple Inc. The company has also exercised significant control over the inventory of some of the biggest sellers on Amazon.in, the documents show, even though it says publicly that all sellers operate independently on its platform.

Government rules announced in 2016 required that an e-commerce platform should “not exercise ownership” over sellers’ inventory.

Gopal Krishna Agarwal, a national spokesman for Modi’s ruling party, said the findings in the Reuters story were “serious” and that “any predatory policy, deep discounting … will not be tolerated by the government. The party will take a stand on that.”