Amazon Clarifies Frontizo Common Director Issue In Karnataka HC

The US-based ecommerce company Amazon told the Karnataka High Court on Thursday that Amazon Seller Services, which runs the company’s India ecommerce platform, doesn’t have any common director with seller entities Cloudtail and Appario, in response to a hearing on the violation of foreign direct investment (FDI) rules in ecommerce and anti-competitive practices. 

Amazon’s arguments came against allegations made by sellers association Delhi Vyapar Mahasangh (DVM), which had contended that the company gives preference to its own sellers Cloudtail and Appario, and has a control on the two entities through common directors, which is barred under the FDI rules for ecommerce. 

The high court is hearing India’s antitrust watchdog, the Competition Commission of India’s (CCI) plea for vacating the stay on an investigation into alleged anti-competitive practices by Amazon and Flipkart, based on complaints filed by DVM and the Confederation of All India Traders (CAIT). 

“There is one director common to Frontizo and Amazon Retail India Pvt Ltd. But Amazon Retail India is not the entity in question, it is not the marketplace entity,” Subramanium said. “The entity which is the subject matter of investigation under Sec 26 (1) of Competition Act is Amazon Seller Services India Pvt Ltd. This shows non-application of mind by CCI,” Amazon’s counsel Gopal Subramanium told the court on Thursday, according to a CNBC report.

An Amazon group company holds 24% stake in Frontizo, while the rest is held by the Patni Group, Subramanium said. Amazon holds a similar stake in Prione Business, the holding company of Cloudtail, while the rest is held by Narayana Murthy’s Catamaran Ventures, he added. But neither of the stakes is held by the business which operates the ecommerce marketplace, Amazon clarified. 

Traders’ bodies CAIT and DVM have accused Amazon and Flipkart of giving deep discounts, preferential treatment to select sellers and more. Looking into these complaints, CCI had ordered a probe based on ‘prima facie’ evidence just two days before Amazon CEO Jeff Bezos landed in India on a business trip in January 2020. CAIT had called for a nationwide protest during Amazon CEO Bezos’ visit to India and protested outside the stadium he was speaking at in Delhi. 

In August 2020, the All India Online Vendors Association (AIOVA) had filed an antitrust case against Amazon with the CCI, accusing it of anti-competitive practices through preferential treatment of seller entities such as Cloudtail, Amazon Retail and Amazon Wholesale, where it either holds a stake or they are its group companies. 

The AIOVA had alleged that Amazon India’s wholesale arm would buy goods in bulk from manufacturers and sell them at a loss to sellers such as Cloudtail. Such sellers would then offer goods on Amazon India at big discounts.

A similar investigation for “abuse of dominance” had been initiated against Flipkart last year.