The Confederation of All Indian Traders (CAIT) has moved the Competition Commission of India (CCI), seeking a direction to block the acquisition of Cloudtail India by Amazon.
Cloudtail is a 100 per cent subsidiary of Prione Business Services, a joint venture of Amazon and Catamaran Ventures and is also presently the largest seller on Amazon's e-commerce platform, Amazon.in.
Citing the proposed structure of stake in Cloudtail, the plea said: "Amazon would have 100 per cent stake in Cloudtail, post the proposed combination. It is submitted that if the proposed combination is allowed, then it would cause an appreciable adverse effect on competition." CAIT argued that complete control of Amazon will result in Cloudtail getting further preference on its platform.
In a statement, CAIT, providing instances wherein Amazon gives preference to Cloudtail, said such preference will only become more pronounced after this transaction, which would have a destabilising effect on the e-commerce market in India.
The traders' body petition said: "Another evidence showing that Amazon has given preference to Cloudtail on its platform is the fact that Cloudtail's revenue has increased significantly over the years. In FY 2021 only, Cloudtail's revenue increased by 46 per cent to INR 16,639 crore."
The plea argued that Cloudtail gets preference on the platform of Amazon, and with the proposed combination, it would become a wholly-owned subsidiary of Amazon, and gain further advantages such as access to immense financial resources and data, in addition to better listing on the platform.
In a statement, CAIT said: "Cloudtail charges less fees/commission and is a preferential seller on the platform, and with a 100 per cent acquisition of Cloudtail, a preferred seller and the marketplace at its e-commerce portal, Amazon will cause an adverse effect on the market." It alleged that this transaction is not only in violation of competition law but is also a violation of FDI norms too.
The traders' body argued that Amazon has emerged as a gatekeeper and an essential trading partner of retailers to reach out to the consumers, especially in Covid period and even post Covid situation, consumer behaviour is likely to change significantly and shift towards e-commerce only.
"Therefore, it is crucial that Amazon as a marketplace remains neutral and fair. This Hon'ble Commission has itself stated that rules of engagement for the platforms become important and it has to be ensured that the relationship is not exploited by the platforms. Therefore, Amazon cannot be allowed to have a special relation with a few of its sellers, to the disadvantage of other smaller sellers," added the plea.
A CAIT statement said Amazon has proposed to completely acquire Prione by acquiring all the shares held by Hober Mallow Trust. "Presently, Prione is controlled by Hober Mallow. Seventy Six percent (76 per cent) of the share capital of Prione is held by Hober Mallow. Amazon Asia-Pacific Resources Pvt Ltd already owns 23 per cent of the share capital of Prione, and Amazon Eurasia Holdings S.a.r.l. owns 1 per cent of the share capital of Prione. Therefore, Amazon holds 24 per cent stake in Prione as of today. However, by acquiring the shares of Hober Mallow,Amazon and its affiliated entities would have 100 per cent stake in Prione," it added.