Amazon battles Mukesh Ambani for the future of e-commerce in India
Indian officials have been silent about Amazon’s fight with Reliance, but they have pressured American society on other fronts. The Reserve Bank of India and the Enforcement Branch, India’s federal crime control agency, are investigating Amazon for alleged violations of Indian foreign investment laws. Amazon and Walmart’s Flipkart are also fighting a legal battle to prevent the Competition Commission of India, the country’s antitrust regulator, from conducting a formal investigation into their sales practices.
In a statement, Amazon said company officials “take compliance with all applicable laws and policies seriously” and are trying to protect their rights by trying to stop the Reliance-Future Group deal. “We are disappointed with the motivated attempts to influence FDI policy in order to create an level playing field,” the statement said, referring to restrictions imposed by India on foreign direct investment.
Neither Reliance nor the Future Group responded to emails seeking comment.
In 2018, the Indian government enacted a law stating that foreign-owned e-commerce businesses could only operate as neutral marketplaces where independent sellers place their products. The government said the limits would protect small businesses by limiting the ability of platforms like Amazon to sell their own products. Strictly following the law would have meant, for example, that Amazon couldn’t sell its popular Echo device on its own service.
The Indian government is not alone in worrying about Amazon’s potentially dominant market power. Officials and lawmakers in the United States and Europe have an increasingly grim view of Amazon’s ability to use its data to develop and sell its own products. Still, the law has been widely interpreted as beneficial to Mr. Ambani’s foray into e-commerce.
“India’s foreign retail investment laws did not make sense in the mid-2000s when they were enacted, and they don’t have any today,” said Arvind Singhal, president. and Managing Director of Technopak Advisors, a management consulting firm focused on retail and consumer products. “The laws protect the big local players in the name of protecting mom-and-pop stores.”
In this environment, Amazon has acted cautiously to strike a deal with Future Group. The Indian company was heavily in debt when it struck its pact in 2019. The deal was structured to comply with the strict laws already in place regarding foreign companies investing in retail.
The Future Group deal was tantamount to Amazon’s option to expand into physical stores in India if New Delhi loosens its retail laws. It also allowed Amazon to use Future’s store network as hubs for the rapid shipment of fresh fruit and vegetables to customers ordering groceries online. Before the dispute between the companies erupted, customers could order vegetables from Big Bazaar stores on the Amazon app.