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'Business in India? Risks, uncertainties are substantial'

May 13, 2016 15:36 IST


Recently, the department of industrial policy & promotion came out with guidelines restricting price discounting on e-commerce platforms

Amazon, the Seattle-based online retailer, has highlighted uncertainties and regulatory risks in its India business, citing the latest e-commerce guidelines which allowed 100 per cent foreign investment in marketplace platforms but with several riders.

The company has pointed at the possibility of fines and financial penalties, as well as the risk of closure, in its quarterly report filings to the US Securities & Exchange Commission.

There are "substantial uncertainties’’ regarding the interpretation of laws in India and in China, it has told its shareholders. “And, it is possible that these governments will ultimately take a view contrary to ours,’’ it has said in the filings made on Wednesday.

Recently, the department of industrial policy & promotion came out with guidelines restricting price discounting on e-commerce platforms and preventing any vendor on an e-retail platform from doing more than 25 per cent of all sales.

In the case of Amazon, Cloudtail, its joint venture with Catamaran Ventures, the latter promoted by Infosys co-founder Narayana Murthy, is the most prominent vendor on the platform.

Amazon has said, “For, we provide certain marketing tools and logistics services to third-party sellers to enable them to sell online and deliver to customers." Without naming Cloudtail, the company added, “we hold an indirect minority interest in an entity that is a third-party seller on the marketplace."

Saying the company believes these structures and activities comply with existing laws, it added: “They involve unique risks.”

Its Chinese and Indian businesses and operations might, it said, be unable to continue to operate if "we or our affiliates are unable to access sufficient funding or in China enforce contractual relationships with respect to management and control of such businesses".

Amazon believes its businesses in India and China could be subject to fines and other financial penalties, depending on how its international operations were interpreted by regulators. It has also mentioned the possibility of getting its licences revoked or even an entire shutdown, subject to regulations and their interpretation.

In a post-earnings call with investors on April 30, Phil Hardin, head of investor relations at Amazon, had said, “We’re happy to see the recent clarifications (on e-commerce foreign investment in India).

"We’re happy to operate in any regime and the more clarity, the better.” He had not elaborated on how Amazon would manage Cloudtail’s business.

Image: A worker packs a box at Amazon's logistics centre in Graben near Augsburg. Photograph: Michaela Rehle/Reuters

Nivedita Mookerji in New Delhi
Source: source image