Amazon’s top Indian seller Cloudtail to cease operations next year amid regulatory heat

Amazon and parent of its top Indian seller Cloudtail have decided to not continue their joint venture after May 2022, the two firms said in a statement Monday, hours after India’s top court ruled that the American e-commerce firm and Walmart’s Flipkart must face antitrust investigations in the South Asian market.

Billionaire N.R. Narayana Murthy’s Catamaran, the parent firm of Cloudtail, and Amazon launched the joint venture in the country in 2014. The joint venture restructured its ownership in 2019 following India’s regulatory changes — more on this shortly.

The development follows India’s Supreme Court ruling earlier in the day that Amazon and Flipkart must face antitrust investigations ordered against them in the country.

The Indian watchdog — the Competition Commission of India — ordered an investigation into the firms last year for allegedly promoting select sellers (those in which they own a stake) on their e-commerce platforms and using business practices that stifle competition.

In a statement Monday, the two firms said Cloudtail — registered as Prione Business Services — enabled over 300,000 sellers and entrepreneurs to go online and provided 4 million merchants with digital payment capabilities. The joint venture, they said, helped merchants and small businesses access millions of customers in India.

Cloudtail is one of the largest sellers on Amazon in India. Indian newspaper Economic Times reported that Cloudtail will cease operations next year. The e-commerce group has stakes in a few more third-party sellers, including Appario Retail, which is its joint venture with Patni Group. Reuters reported that Amazon has held talks with Patni Group to explore whether they want to continue the joint venture.

“As our JV with Amazon reaches the end of its tenure, I reflect on this successful partnership that introduced the power of digitization and empowered hundreds of thousands of SMBs across big and small towns,” said M.D. Ranganath, president of Catamaran, in a statement.

The two firms did not say why they decided to end their joint venture.

Long-standing laws in India have restricted Amazon and other e-commerce firms from holding inventory or selling items directly to consumers. To bypass this, firms have operated through a maze of joint ventures with local companies that operate as inventory-holding firms.

India got around to fixing this loophole in late 2018 in a move that was widely seen as the biggest blowback to the American firm in the country at the time. Amazon and Walmart-owned Flipkart scrambled to delist hundreds of thousands of items from their stores and made their investments in affiliated firms way more indirect.

In June this year, India proposed even tougher e-commerce rules that, among other things, prohibit Amazon, Flipkart and other e-commerce players from running their in-house / private labels. The new proposal asks e-commerce firms to ensure that none of their related and associated parties are listed on their platforms as sellers for selling to customers directly.

“Amazon and Catamaran entered into a JV in the early days of e-commerce in India with a shared vision of transforming hundreds of thousands of small businesses in a fast-changing digital world, by providing online capabilities enabling them to access customers both in India and globally,” said Amit Agarwal, Global Senior VP and country head of Amazon India, in a statement.