Even as growth in India’s e-commerce space is seen to be slowing, the industry has come in for some uncharacteristically harsh words from the country’s government.
India’s Union Minister for Commerce and Industry Piyush Goyal has launched a scathing attack on e-commerce companies, saying that they are investing heavily in India only to recoup their money through predatory pricing once they’ve cornered the market. He even named Amazon as one of the firms that was allegedly behaving in this manner.
“When Amazon says we are going to invest a billion dollars in India and we all celebrate, we forget the underlying story that that billion dollars is not coming in for any great service or any great investment to support the Indian economy,” Goyal said at an event. “They made a billion dollars loss in their balance sheet that year. They have to fill in that loss,” he added.
“If you make 6,000 crore loss in one year, does that not smell of predatory pricing to any of you? Should this not be a matter of concern for all of us?” Goyal continued.
“E-commerce has a role (in India), but we’ll have to think very carefully and cautiously what that role is, how that role can be in a more organized fashion,” Goyal said.
Goyal seemed to be hinting that foreign firms like Amazon were losing money in India because they engaging in predatory pricing, or selling items below their actual cost prices. These low prices would drive smaller Indian firms out of business, ultimately giving these e-commerce firms a monopoly in the market, which they would exploit with higher prices in the coming years.
But Goyal didn’t stop there — he even indirectly accused Amazon of spending inordinate amounts of money to engage lawyers so that its skirting of the law wasn’t pulled up by courts. “They paid a thousand crores to “professionals”,” Goyal said. “I don’t know who these professionals are. I myself am a chartered accountant. I’ve done law. But I’d love to know which chartered accountants, professionals, lawyers get a thousand crores. Unless you’re paying all the top lawyers to block them so that nobody can fight a case against you. You can take retainership with all the top lawyers and then there’s nobody left to fight against,” he added.
And Goyal also attacked Amazon for using shell firms to directly sell goods to Indian consumers in contravention of Indian FDI rules. “They are after all an e-commerce platform. They are not allowed to do B2C. The e-commerce platform legally cannot do business to consumer. They create entities, where Indians sadly contribute to making those entities. Then they get caught so they start closing down those entities. That’s part two of the story,” he added. Amazon had tied up with Narayan Murthy-owned Catamaran Ventures to create an entity named Cloudtail to sell goods on its platform. The Indian entity held a majority share in Cloudtail, helping Amazon indirectly circumvent India’s FDI regulations. In 2021, they had decided to part ways following regulatory and media scrutiny.
“But (such entities) only reroute all the business through an entity to show that it’s business to business,” Goyal continued. “But reality is all of you buy on these platforms, don’t you? How do you buy? B2C is not allowed on these platforms. How are they doing it?” he asked the audience.
This is a pretty extraordinary attack, both in its specificity and its ferocity — Goyal not only named Amazon, but also listed out the various ways it was circumventing the law. The move is also unusual, because the Indian government has largely championed FDI in India, and PM Modi has even met Jeff Bezos in person on several occasions. But things have changed over the last few months — the BJP couldn’t manage to secure a clear majority in the last elections, which has meant that’s it’s not only more reliant on its allies, but also on its ideological fount the RSS, which it had been distancing itself from over the last few years. The RSS and its allied organizations, of course, are vociferously against foreign involvement in retail, and believe that such multinational corporations could take away the livelihoods of millions of small mom-and-pop stores in India. But a weakened BJP now appears to be toeing the RSS line — and Amazon and other e-commerce companies have have ended up in its crosshairs.