Amazon Dodging Indian Law: US Officials Defend Company's Business Practices

US officials rushed to defend Amazon’s business practices in India after Reuters reported in February that the company had favoured certain sellers on its website and bypassed local law that requires foreign e-commerce companies to treat all vendors equally, documents obtained by the news agency show.

Emails obtained through the US Freedom of Information Act from the Office of the United States Trade Representative (USTR) showed that US officials prepared a note for John Kerry, a top envoy of President Joe Biden, about the February 17 report. The note, contained in an email dated February 18, said that India’s antitrust watchdog had reviewed many such allegations against US e-commerce companies and found nothing wrong.

Biden’s envoy, former US Secretary of State Kerry, is in charge of climate change policy. He was scheduled to speak that day with India’s Commerce Minister Piyush Goyal. The US government was concerned that Goyal would bring up the Reuters story, so it hastily drafted a note about the article in case he did, the emails show.

“This could come up in the call since as you know Minister Goyal is prone to bring up tangential topics,” Thomas Carnegie, a US embassy official in New Delhi, emailed an official at the USTR.

Philip M. Ingeneri, another US embassy official, also told the USTR official in an email on February 18 that he had “verified” the contents of the note prepared for Kerry with Amazon India’s government affairs chief as “true and accurate.” The emails do not describe what ultimately happened during the Kerry-Goyal call.

The US embassy in New Delhi referred questions to the US Department of State in Washington, which said it expected that any issues regarding US e-commerce companies’ practices in India would be reviewed by the Competition Commission of India (CCI) “with the same level of independence, transparency, and professionalism it has demonstrated in the past.”

Spokespeople for Kerry, the USTR, and Goyal did not respond to Reuters queries.

The report in February, based on internal Amazon documents, revealed that the US firm has for years given preferential treatment to a small group of sellers on its India platform, circumventing the country’s tough foreign investment rules that are aimed at protecting small Indian brick-and-mortar retailers.

The article stirred up weeks of controversy in India, sparking calls from traders to ban Amazon. The CCI said in March that the story corroborated evidence it had received against Amazon, while the Enforcement Directorate, India’s financial-crime fighting agency, asked Amazon for information and documents related to the company’s Indian operations, Reuters has reported. The CCI enforces India’s antitrust laws.

‘Sensational language’

In a March 16 email to US officials, including at the USTR’s office, Ingeneri wrote, in an apparent reference to the February article, that a Reuters reporter had used “sensationalist language” and relied on Amazon’s “activity before 2018 that was aggressive but not illegal at the time.” The next sentence in the email was redacted.

In response to questions from Reuters, a spokeswoman for Amazon in India said the company had no comment.

Amazon has previously told Reuters it “does not give preferential treatment to any seller on its marketplace,” and that it “treats all sellers in a fair, transparent, and non-discriminatory manner.”

But internal Amazon documents show that the e-commerce giant discounted its fees to certain sellers on its platform, and that a few dozen of Amazon’s more than 400,000 sellers in early 2019 accounted for about two-thirds of the e-commerce site’s online sales.

The note prepared for Kerry summarised the Reuters story’s findings. Among them: that Amazon senior executive Jay Carney had been advised by colleagues in 2019 not to disclose to India’s ambassador in Washington that two sellers on Amazon’s Indian website accounted for a large chunk of its sales. Amazon holds indirect equity stakes in those sellers.

From 2009 to 2011, Carney served as President Biden’s communications director when Biden was vice president, before going on to serve as press secretary to President Barack Obama. The note for Kerry identified Carney as “Amazon Senior Vice President and former Obama Administration spokesman.”

Carney had no comment for this article, the Amazon spokeswoman said.

Under the headline “If Asked: Allegations of Amazon E-Commerce Violations,” the note stated: “We have seen a February 17 Reuters report raising concerns about US e-commerce companies’ practices in India and note many of the allegations have been previously reviewed by the Competition Commission of India without any negative findings.” The email with the note was marked “SENSITIVE BUT UNCLASSIFIED.”

“The Reuters article repeated prior allegations made by small traders,” the note stated. The partially redacted note also stated that “since 2013, Amazon has invested over $5.5 billion (roughly Rs. 400,50 crores) in India, employs 100,000 Indians, and supports 400,000 vendors on its market.”

India’s strict foreign investment rules for e-commerce have caused friction between Washington and New Delhi, and frustrated US firms with online businesses in India, such as Amazon and Walmart.

The CCI in January 2020 launched a probe into Amazon on allegations it was favouring certain sellers, but the investigation has been on hold as the company mounted a court challenge. A separate antitrust complaint by a group of online sellers filed against Amazon is currently pending review by the CCI.

© Thomson Reuters 2021