Cloudtail Challenges Validity Of CCI Raids Over Amazon Connection: Report

Etailer Cloudtail, a JV between Amazon and Catamaran Ventures, has questioned the validity of the CCI raids being conducted on its premises in April 2022. The ecommerce vendor has claimed that since Amazon no longer holds a controlling interest in the company, there’s no link for CCI to probe the latter while investigating Amazon.

According to an ET report, Cloudtail argued that Amazon no longer controls it. But CCI has reportedly been probing the company over transactions when Amazon was a shareholder, and CCI had initially ordered a probe in 2020. CCI claims that Cloudtail and Amazon were linked then.

“CCI has been taking a position that when the commission originally ordered the investigation (January 2020), Amazon had a significant stake in Cloudtail and hence the commission was within its purview to conduct such raids,” the report added. 

The move comes even though the etailer is no longer an active seller and is seeking to shut its business down. 

To note, CCI has been visiting the premises of some of India’s largest online sellers including Amazon’s former top sellers Cloudtail and Appario Retail and some top sellers of Flipkart and even Meesho. 

While the exact nature of the alleged violation was not immediately clear, CCI seized some important financial documents from Cloudtail and Appario, suggesting some financial dealings and linkage between Amazon and its preferred sellers. 

As for Amazon, CCI has alleged that the ecommerce giant is abusing its market dominance by several means, including promoting preferred labels and deep discounting methods and creating artificial competition.

The Cloud That Tails Cloudtail

Ecommerce giants Amazon and Flipkart have been under the government radar since 2020 when the CCI ordered a probe into the alleged anti-competitive practices and seller favouritism. For Cloudtail, controversies and announcements have plagued the company for some time, especially since 2022 began. 

In the early days, while Amazon gave up its holding in Cloudtail, it proposed to acquire 100% in Cataraman-backed Prione (the Cloudtail parent). The CCI-approved acquisition has not sat well with traders and small sellers across the country.

In April 2022, CCI raised the Cloudtail offices and seized several financial documents from their premises. Several online vendors including Cloudtail then approached the Delhi High Court against the raids. Cloudtail has argued that the company is just a third-party seller on Amazon and thus, should not have been raided.

It even accused CCI of detaining three CCI employees and questioning them for over 30 hours. 

Notably, the courts have sided with CCI and allowed the competition watchdog to move ahead with the probe against these ecommerce giants, including Cloudtail.

In May 2022, CCI reviewed the seized documents and suggested that financial dealings occurred between Amazon and its preferred sellers. Both Amazon and Cloudtail have also faced criticism over the former’s alleged preferential treatment towards the latter (and Amazon-Patni’s JV Appario Retail).

Add to that, the etailer will be ceasing operations soon and has sent contract termination notices to its vendors, causing panic among small sellers who hold inventory for Cloudtail. “Cloudtail proposes to sell/liquidate its existing/residual inventory including the products procured from you,” the company had said in an email to vendors.

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.