During a visit In India in 2014, Amazon CEO Jeff Bezos made a resounding announcement: His company was investing $ 2 billion in the South Asian nation, just a year after the country began operations.
Amazon's announcement highlighted how India has come to open up to foreign companies. The nation, which had largely kept its doors closed to international giants between its independence in 1947 and liberalization in 1991, has slowly morphed into the largest open market in the world.
In a TV interview in 2014, Bezos said there was a perception that India was not an easy place to do business. But Amazon's growth in the country, he said, was proof that this belief isn't accurate.
"Are there any obstacles? There are always obstacles. Wherever you go, each country has its own rules and regulations, "he said.
Six years, and more than $ 4.5 billion in additional investment later, Amazon today appears to be facing more hurdles than ever in India, the second largest Internet market with over 600 million users.
Long-standing laws in India have forced Amazon, which has yet to make a profit in the country, and other e-commerce companies not to hold inventory or sell items directly to consumers. To get around this problem, the companies have operated through a maze of joint ventures with local companies operating as stock holding companies.
India managed to solve this loophole in late 2018 in a move that was widely regarded as the biggest backlash for the American company in the country at the time. Flipkart owned by Amazon and Walmart rushed to remove hundreds of thousands of items from their stores and made their investments in affiliated companies much more indirectly.
Now the nation is ready to further strengthen this approach. Reuters reported last week that New Delhi is considering making changes to some provisions that would prevent affiliates from even holding an indirect stake in a seller through their mother.
The Confederation of All India Traders, an Indian trading entity that claims to represent over 80 million businesses, told the publication that Indian Commerce Minister Piyush Goyal assured the organization that it is working to address concerns about alleged violations shortly. of the current rules.
The upcoming policy change is just one of many headaches for India's largest e-commerce company.
Amazon is aggressively fighting a battle to block a deal between its unrelated partner Future Group and Reliance Retail, the two largest retail chains in India.
Last year, Future Group announced it would sell its retail, wholesale, logistics and warehouse businesses to Reliance Retail for $ 3.4 billion. Amazon, which bought stakes in one of Future Group's unlisted companies in 2019, says the Indian firm violated its contract (which would have given Amazon the right of first refusal) and engaged in insider trading.
Despite tech giants and investors plowing more than $ 20 billion to create an e-commerce market in India over the past decade, online retail still represents only a single digit pie of all retail sales. in the country.
In recent years, Amazon, Walmart, and dozens of other startups have embraced this awareness and sought to work with neighborhood stores dotting tens of thousands of cities, towns and villages in India.
With Reliance Retail and telecom giant Jio Platforms, two subsidiaries of one of India's largest companies (Mukesh Ambani's Reliance Industries) entering the e-commerce market and receiving backing from global giants including Facebook and Google last year year, earning a large stake in Future The group is one of the few ways Amazon can accelerate its growth in India.
The American e-commerce firm has so far had little luck in overturning the deal between Indian companies. Last year, Amazon contacted the Indian Antitrust Competition Commission of India and market regulator SEBI to block this transaction. Both bodies ruled in favor of Future Group and Reliance Retail.
Amazon must have anticipated this outcome because it initiated legal proceedings in an arbitration court in Singapore. Unsurprisingly, the company has chosen to pursue its legal argument outside India as well.
Most of the cases received by the Singapore International Arbitration Court have come from India in recent years. Vodafone, which has invested more than $ 20 billion in India and received billions of dollars in unpaid taxes from the country, is another high-profile name that has knocked on Singapore's door. After losing to India, he came out victorious from the Singapore arbitration court last year.
On Monday, Amazon filed a new petition in the Delhi High Court in which it is seeking to enforce the SIAC ruling (which ordered the temporary suspension of the agreement last year) and prevent the Indian company from continuing the agreement based on the judgments of CCI and SEBI.
The company claims that Future Group "deliberately and maliciously" disobeyed SIAC's international arbitration ruling. In its petition, Amazon is also calling for the detention of Kishore Biyani, founder and president of Future Group.
"Vocal for Local"
As India grappled with containing the spread of the coronavirus last year, Indian Prime Minister Narendra Modi urged the 1.3 billion citizens to make the country "self-sufficient" and "be vocal for the local."
The inward movement contrasts with its main promise in the early years of taking power in 2014, when it pledged to make India more welcoming to foreign companies than before. In recent years, India has proposed or enforced several regulations that harm American companies, although none seem to suffer as much as Amazon.
Last year, New Delhi began imposing a 2% tax on all foreign invoices for digital services provided in the country. The US Trade Representative said earlier this month that India is taxing numerous categories of digital services that are "not subject to tax with other digital services taxes adopted around the world."
The aggregate tax bill for US companies could exceed $ 30 million annually in India, according to USTR surveys. In conclusion, it found that India's digital tax move is incompatible with international tax principles, unreasonable and burdening or restrictive of US trade.
Modi's new way of life for India will be music to the ears of Mukesh Ambani, president of Reliance Industries, ally of India's prime minister and richest man.
Before selling over $ 20 billion worth of stakes in Jio Platforms and more than $ 6 billion in Reliance Retail to select foreign investors, Ambani made a famous speech in 2019 in which he urged the need to protect Indian data in patriotic terms.
"We must collectively launch a new movement against data colonization. For India to succeed in this data-driven revolution, we will have to migrate control and ownership of Indian data to India, in other words, Indian wealth back to every Indian, "he said.
Why so many international companies have invested in one of Reliance's properties remains a big question. A senior executive at an American company told ProWellTech, on condition of anonymity (for fear of retaliation), that investments in Jio Platforms, India's largest telecommunications network with nearly 410 million subscribers, and Reliance Retail is a time of déjà vu for the nation, where a few decades ago one of the only ways to do business in the nation was to partner with a local company with enormous political power.
In a series of tweets, Raman Chima, a former political executive at Google and now working for the non-profit digital defense group Access Now, said the Android maker had evaluated in 2011-12 the collaboration and investment in a company like Reliance to "turn the page on Indian political risks."
The idea raised concerns about Google's values, he said. "More than one executive involved in those discussions has reported concerns over Reliance's reputation, particularly about problematic approaches to gaining influence with officials and politicians making political decisions, money, ethics in government-business relationships."
Amazon itself was rumored to be interested in getting a multibillion-dollar stake in Reliance Retail last year, but it appears the two companies have stopped engaging on any issue.
While Amazon solves these problems, last week gave the company another blow. A senior executive at the company and Indian producers of a mini-series for Amazon Prime Video are threatened with prosecution in the country after Modi's ruling party found the show offensive to the country's Hindu majority.
A Hindu nationalist group, politicians with the ruling Bharatiya Janata party, and a BJP group representing members of India's lower castes were among those who filed a complaint with the police against the nine-part miniseries "Tandav" and Amazon. The company bowed to the pressure and changed some scenes.
"The real reason for the complaints against 'Tandav' may be that the show shows a mirror uncomfortably close to Indian society and some of the problems attributed to Mr. Modi's administration. In the opening episode, the show features protesting students and disgruntled peasants, echoing events that have occurred in recent months, "the New York Times wrote.
"Mirzapur", another Amazon show, also drew a criminal complaint in India last week for hurting religious and regional sentiments and slandering the Indian city. The Indian Supreme Court has issued notices to the creators of "Mirzapur" and asked for answers.
In the aforementioned interview, Bezos said that Amazon's job is to follow all the unique rules that various countries require to respect and to "adapt our business practice to those rules."
In India, society is increasingly being asked to what extent it is willing to adapt its business practice. To what extent is he willing to bend that he is no longer the Amazonian people he cared about.
