US e-commerce companies are having a tough time in India, with the country now ordering investigations for alleged violations of competition rules by Amazon.com and Walmart-owned Flipkart. This is the latest setback for US e-commerce companies operating in India and certainly isn't good news.
Last year, India introduced more stringent foreign investment rules, which has already made operations difficult for these companies. Moreover, the news comes hours after Walmart fired more than 50 employees in India and just days ahead of Amazon's boss Jeff Bezos' India visit. Amazon already is bracing for large scale protests by thousands of retailers during Bezos' short trip to India this week.
What are the allegations?
On Monday, India's antitrust body, Competition Commission of India (CCI), ordered a wider probe into allegations of flouting competitions rules by Amazon and Walmart-owned Flipkart. Amazon and Flipkart are the two biggest e-commerce rivals in India.
Per the Competition Commission of India, the two e-commerce giants have been alleged of promoting "preferred sellers" which has been significantly hurting other smaller sellers. The antitrust body also said that the probe has to be completed within 60 days.
The complaint was lodged by Delhi Vyapar Mahasangh. The group, which represents thousands of small and medium scale retailers, has alleged the e-commerce companies of controlled several of its preferred sellers directly or indirectly.
Following the complaint, the Competition Commission of India reviewed the charges and has now ordered for an investigation. According to Reuters, the order read: "Exclusive launch (of mobile phones) coupled with preferential treatment to a few sellers and the discounting practices create an ecosystem that may lead to an appreciable adverse effect on competition."
Amazon, Walmart in rough waters in India
Walmart invested $16 billion to buy a majority stake in Flipkart in 2018. Although the company was one of the most e-commerce shopping sites, it was incurring losses. Walmart since then has been trying to resurrect the company and bring it back into the green. The company on Monday also fired 56 employees, including eight senior management employees in a bid to resurrect its business in India.
Amazon, on the other hand despite a significant presence, has time and again been slammed by retailers' unions for maintaining unhealthy competition rules. Last year, India introduced stringent foreign investment rules, which have further made things difficult for foreign e-commerce companies. Amazon already is bracing for wide-scale protest in different parts of the country by medium and small retailers during Jeff Bezos' India visit this week.