The Indian government has had a rather contentious relationship with Amazon. This seems to be an enduring trend as the latter seems to have a certain disregard for Indian business laws. Amazon is one of the biggest and most profitable companies in the world and its founder Jeff Bezos is the undisputed richest man alive. In recent years, however, Bezos and Amazon’s public image have taken a hit.
There can be no argument made against the service itself that Amazon provides. To have goods delivered to your doorstep in a matter of days regardless of where you are is a testament to the technological achievements of the modern world. When it comes to e-commerce, Amazon has figured out not only how to play the game but also how to keep winning. They are, in almost every way, symbolic of capitalism in the 21st century.
This is not a compliment. To get to the very top, one seems to have to cut corners, but to accuse Amazon of merely cutting corners only hints at the partial truth. By now people ought to be relatively aware of how Amazon conducts its business. It treats its employees very poorly and does its very best to not pay taxes. Some of the stories from the warehouses are truly shocking, like that of employees having to urinate in water bottles because they are not even entitled to a 2 minute break. In 2018, the company patented wristbands which each warehouse employee has to wear. These bands track their movements and vibrate if they are not moving in the right direction, taking corporate surveillance to a frightening new extreme.
Amazon has run into numerous issues with the Indian authorities as well. Reuters published a report earlier this year detailing the cat and mouse game that the company has been playing with the Indian government. We wrote an article about it too. The Competition Comission of India (CCI) works towards ensuring a level playing field within the Indian markets. Amazon’s business model works in such a way that the vast majority of the goods it sells on its platforms are usually sold by a very small handful of sellers. Amazon also tends to have a significant stake in these sellers. In fact, in most countries, Amazon itself directly sells goods to the consumer. Indian laws prohibit e-commerce websites from engaging in practices that favour a small group of sellers, and as such
Amazon had to restructure its business for the Indian market. Except Amazon doesn’t really want to change anything. It created a couple of sellers in partnership with Indian businessmen called ‘Cloudtail’ and ‘Appario’ in order to comply with the laws which stated that no one seller could account for more than 25% of the sales on a platform. While these two together account for just under half, they are both owned by Amazon, so in essence, nothing really changed, except for the forgoing of a small amount of profit.
The Indian authorities were well aware of what Amazon was doing, and the situation even reached a point where the Commerce Minister, Piyush Goyal, called a meeting with the heads of Amazon, Flipkart, and other e-commerce entities and threatened them with bad press if they failed to comply properly with the laws instead of just finding a work around.
The issues are yet to be resolved as one tries to outsmart the other. In the latest development, however, the Ministry of Commerce and the Food and Consumer Affairs Ministry are working together to draft new policies pertaining to e-commerce platforms. One of the proposals that is likely to go through is the banning of ‘flash sales’. These are sales that are announced in the spur of the moment, and offer huge discounts on products which end up bringing a lot of traffic to the websites and invariably a lot of sales too. Amazon has Prime Day and it is usually the most profitable day of the year for the company. The problem is that only the big sellers, which are owned by the platform itself, can afford to offer such huge discounts
The government also wants these platforms to specify the country of origin of the goods that they are selling, along with suggesting a domestic alternative of the same. This is a part of its ‘Swadeshi’ agenda which aims to give a boost to domestic manufacturing. Current practices seem to place domestic producers at a disadvantage as their products don’t show up as easily on the websites.
There will also be rules that will improve consumer protection as the platforms will be required to publish the details of the grievance officer and the means to get in touch with the same. Companies will also have to employ a chief compliance officer who will be responsible for making sure that the firm is properly following the laws of the land.
While the proposed rules will certainly benefit competition and consumer interests, history suggests that the likes of Amazon and Flipkart will have a trick or two up their sleeves. The back-and-forth between the government and the e-commerce entities is unlikely to reach a point of resolution just yet. It must be said though that the government is making a serious effort to rein in these billion dollar enterprises. Now the ball is in the e-commerce industry’s court.