The official emphasized the need to protect local businesses and ensure fair competition in the e-commerce sector.
India's commerce minister accused Amazon and other e-commerce companies of predatory pricing practices and said the sector's rapid rise should not disrupt millions of brick-and-mortar stores operating in the country.
Amazon and Walmart's Flipkart have reshaped India's retail landscape in recent years, with both companies investing billions of dollars to expand and get consumers to their platforms which offer lucrative discounts.
Indian regulations prohibit Amazon and Flipkart from stocking goods and selling directly to consumers, and they can only operate a marketplace for other sellers to offer products. However, small retailers have often alleged that the regulations are bypassed using complicated business structures.
Commerce Minister Piyush Goyal on Wednesday signalled out Amazon's business practices and said the company's investments in India have often been used to cover its business losses.
Goyal, however, did not provide any evidence to substantiate the claim.
“When Amazon says they're going to invest a billion dollars in India, we all celebrate, but we forget the underlying story — that billion dollars is not coming in for any great service or investment to support the Indian economy. They made a billion-dollar loss in their balance sheet that year. They have to cover that loss,"
Goyal said at an event in New Delhi, where he did not name any other company.
He added:
“If you make a ₹6,000 crore* loss in one year, does that not smell of predatory pricing to any of you? What caused that loss? They are involved in all the e-commerce platforms. They are not allowed to do B2C."
As per the report launched by Pahle India Foundation, e-commerce is a key driver of employment generation and online vendors are employing 54 per cent more people and nearly twice the number of female employees. Piyush Goyal said that there is a need for policies that protect local businesses and ensure fair competition in the e-commerce sector.
Predatory pricing is a fairly common practice all over the world, while there is no unified approach on how to define or regulate such practices, says Elizaveta Pletneva, an analyst at the BRICS Competition Centre.
“From a company's point of view, this is a fairly effective method of squeezing small competitors out of the market at short-term costs. The main concern of the regulators is that no company will act at a loss to itself, so these short-term costs will then be passed on to customers or users of their services, who will no longer be able to choose a competitor when the price rises significantly,”
explains Pletneva.
Tech giants, opening new markets and increasing their influence in existing markets, thanks to the already gained trust and financial power, can afford such practices, while local companies do not have such capacities and are forced to “give up” their market share or even leave the market without regulatory intervention.
Goyal has in the past attacked U.S. e-commerce giants publicly. In 2021, he said companies were using their scale and access to large pools of low-cost capital "to the detriment of mom-and-pop stores" and that they "very blatantly flouted" laws.
*$715 million
Sources: Reuters, Hindustan Times
