Amazon’s takeover of Cloudtail violates India’s FDI rules, says CAIT
CAIT said that the acquisition of 76 per cent stake of Narayana Murthy-led Catamaran Ventures in Prione by Amazon will convert the latter from a marketplace to an inventory-based platform, which is a violation of the FDI policy.
- Dec 23, 2021,
- Updated Dec 23, 2021 4:56 PM IST
The Confederation of All India Traders (CAIT) has said that the e-tailer Amazon’s takeover of Cloudtail’s parent firm, Prione Business Services Private Limited “will be in gross violation of the country’s Foreign Direct Investment policy."
The CAIT said that the acquisition of 76 per cent stake of Narayana Murthy-led Catamaran Ventures in Prione by Amazon will convert the latter from a marketplace to an inventory-based platform, which is a violation of the FDI policy.
Amazon has sought the nod of the Competition Commission of India (CCI) to acquire Catamaran Venture’s stake in Prione, according to a statement released on Wednesday.
“Prione Business Services Pvt. Ltd., the joint venture between Catamaran and Amazon, will be acquired by Amazon subject to requisite regulatory approvals. On August 09, 2021, the Partners had announced their decision to not continue the JV beyond the end of its current term of May 2022,” as per a joint statement.
“Amazon will acquire Catamaran’s shareholding in Prione in compliance with applicable laws including all assets and liabilities. The businesses of the Joint Venture shall continue under the leadership of the current management and on receipt of regulatory approvals, the board of Prione & Cloudtail will take steps to complete the transaction in compliance with applicable laws,” the statement added.
Meanwhile, CAIT National President BC Bhartia and Secretary General Praveen Khandelwal said in a joint statement that Prione is a subsidiary of Amazon Asia Pacific Holdings (“Amazon Asia”), Singapore (24 per cent) and Catamaran Ventures (76 per cent) and wholly owns Cloudtail India Private Limited (“Cloudtail”), which is among the two largest sellers on the Amazon India marketplace.
"Before 2019, Amazon Asia held 49 per cent share in Prione but in order to comply with the revised FDI Policy, the share of Amazon Asia in Prione was reduced from 49 per cent to 24 per cent. The FDI Policy of 2020 revised the definition of “Group Company” to mean that any company that holds more than 26% of the voting rights and can appoint more than 50 per cent of the Board of Directors. To circumvent this policy intervention, Amazon Asia brought down its holding from 49 per cent to 24 per cent. Additionally, the FDI Policy restricts FDI to 51 per cent in multi-brand retail trade (“MBRT”) and permits the same only in single-brand retail trade (SBRT) and wholesale trading,” according to an official statement.
“FDI in e-commerce is permitted for e-commerce marketplace entities (100 per cent) while it is expressly prohibited for inventory e-commerce entities. So basically, if Amazon buys out Cataraman’s stake in Prione it would mean that Amazon would be controlling Cloudtail which is the biggest seller on its marketplace, which is a straightforward clear violation of FDI policy in letter and spirit,” the statement said.
Also Read: Amazon's plea against ED probe into 2019 Future deal to be heard by Delhi HC tomorrow
The Confederation of All India Traders (CAIT) has said that the e-tailer Amazon’s takeover of Cloudtail’s parent firm, Prione Business Services Private Limited “will be in gross violation of the country’s Foreign Direct Investment policy."
The CAIT said that the acquisition of 76 per cent stake of Narayana Murthy-led Catamaran Ventures in Prione by Amazon will convert the latter from a marketplace to an inventory-based platform, which is a violation of the FDI policy.
Amazon has sought the nod of the Competition Commission of India (CCI) to acquire Catamaran Venture’s stake in Prione, according to a statement released on Wednesday.
“Prione Business Services Pvt. Ltd., the joint venture between Catamaran and Amazon, will be acquired by Amazon subject to requisite regulatory approvals. On August 09, 2021, the Partners had announced their decision to not continue the JV beyond the end of its current term of May 2022,” as per a joint statement.
“Amazon will acquire Catamaran’s shareholding in Prione in compliance with applicable laws including all assets and liabilities. The businesses of the Joint Venture shall continue under the leadership of the current management and on receipt of regulatory approvals, the board of Prione & Cloudtail will take steps to complete the transaction in compliance with applicable laws,” the statement added.
Meanwhile, CAIT National President BC Bhartia and Secretary General Praveen Khandelwal said in a joint statement that Prione is a subsidiary of Amazon Asia Pacific Holdings (“Amazon Asia”), Singapore (24 per cent) and Catamaran Ventures (76 per cent) and wholly owns Cloudtail India Private Limited (“Cloudtail”), which is among the two largest sellers on the Amazon India marketplace.
"Before 2019, Amazon Asia held 49 per cent share in Prione but in order to comply with the revised FDI Policy, the share of Amazon Asia in Prione was reduced from 49 per cent to 24 per cent. The FDI Policy of 2020 revised the definition of “Group Company” to mean that any company that holds more than 26% of the voting rights and can appoint more than 50 per cent of the Board of Directors. To circumvent this policy intervention, Amazon Asia brought down its holding from 49 per cent to 24 per cent. Additionally, the FDI Policy restricts FDI to 51 per cent in multi-brand retail trade (“MBRT”) and permits the same only in single-brand retail trade (SBRT) and wholesale trading,” according to an official statement.
“FDI in e-commerce is permitted for e-commerce marketplace entities (100 per cent) while it is expressly prohibited for inventory e-commerce entities. So basically, if Amazon buys out Cataraman’s stake in Prione it would mean that Amazon would be controlling Cloudtail which is the biggest seller on its marketplace, which is a straightforward clear violation of FDI policy in letter and spirit,” the statement said.
Also Read: Amazon's plea against ED probe into 2019 Future deal to be heard by Delhi HC tomorrow