Cloudtail, Appario Raid | CCI conducts raids at Amazon’s top sellers Cloudtail, Appario

New Delhi | Bengaluru: Officials from the Competition Commission of India (CCI) searched the offices of some of the country’s largest online sellers including the Amazon-owned Cloudtail as well as Appario Retail, a joint venture entity between the American online giant and the Patni group, multiple people aware of the matter told ET. The antitrust regulator also visited some of the alpha sellers of Walmart-owned Flipkart and social commerce major Meesho, they said.

The raids, conducted on Thursday, were in relation to complaints about the anti-competitive measures being adopted by these sellers that move large order volumes for the giant ecommerce companies.

“CCI is probing allegations of all sellers not receiving equal treatment from ecommerce platforms and that (online marketplaces) enter into vertical agreements with select sellers,” according to people aware of the matter.

Offline traders and small online sellers have long complained about these issues to the government and the regulator.

Legal experts are of the view that Thursday’s raids are the first instance where CCI is probing a case involving ‘vertical agreements’.

Vertical agreements are those where a large player (in this case, an ecommerce company) enters into exclusive deals with select vendors giving them preference over the other.

Earlier, the competition watchdog has investigated allegations relating to abuse of market position or that of cartels.

“This is the first search and seizure which has happened in relation to a vertical agreement falling under section 3(4) of the Act,” said GR Bhatia, head of competition law, L&L partners.

Earlier in 2020, CCI had begun investigations into allegations of antitrust practices at both Amazon India and Flipkart, the country’s largest online marketplaces. This was in response to strident complaints from offline retail traders, who have accused the two ecommerce giants of fostering close relations with so-called ‘alpha sellers’ that are responsible for a significant chunk of deliveries on these platforms.

People briefed on the matter said the probe conducted by CCI officials on Thursday was across ecommerce firms but Appario Retail and Cloudtail are the two biggest entities in which the American ecommerce giant Amazon directly owns a stake.

Amazon India, Cloudtail, Appario Retail, and Flipkart did not reply to ET’s email queries on the development. A spokesperson for Meesho said the company has not received any communication from CCI. “We operate a pure play marketplace as required under the FDI ecommerce regulations in India.”

The Confederation of All India Traders (CAIT), which has been complaining against foreign etailers like Amazon and Walmart-owned Flipkart, said the raids were ‘much awaited’ and a welcome step from the CCI which will “vindicate the substance of various complaints made by the CAIT”. Praveen Khandelwal, secretary general of CAIT, said, “Since the past three years, the CAIT has been raising strong objections against malpractices of Amazon and Flipkart and filed complaints with CCI beside strongly fighting delaying tactics of Amazon and Flipkart in various courts as well”.

Cloudtail — which is owned by Prione Business Services, a joint venture between Infosys founder NR Narayana Murthy-backed Catamaran Ventures and Amazon — has played a critical role in Amazon’s early success in India. Appario Retail, which is a subsidiary of Frontizo Business Services – a JV between Amazon and the Patni group, has also emerged as one of the largest sellers on the platform. CAIT added in its statement that Murthy’s role in Cloudtail should be probed too.

The Jeff Bezos-led Amazon is now buying 100% stake in Cloudtail, and the deal has been cleared by CCI.

Cloudtail discards Amazon cart

Even as the raids occurred on Thursday, Cloudtail has also hit the end of its run on the local marketplace of the US etailer, ET has learnt.

Currently, there are no listings under Cloudtail on Amazon India. Products listed under Cloudtail have been moved to other seller firms and a portion of products, including private labels of Amazon like Solimo and others, are unavailable for sale on the platform.

ET has been reporting on Cloudtail’s imminent end in the past few weeks and now the nearly eight-year journey for Cloudtail has come to an end on Amazon India.

As previously reported, sellers like Cocoblu Retail, VRP Telematics and Rocket Kommerce are some of the new seller firms that are receiving Cloudtail inventory even as sellers told ET that some of their inventory has also been moved to Etrade Online.

Cloudtail CEO Ranjit Babu had written to vendors on ceasing listing on Amazon and had assured them they will honour all purchase orders raised only till April 18, 2022.

“It’s virtually gone from the platform now. Post the CCI approval, work had begun to close the Prione transaction formally and you won’t find even the page for Cloudtail India on Amazon now, which is usually the case for any seller firm,” a person aware of the matter said.

Previously, Amazon held a 49% stake in Cloudtail, which was set up in 2014. It was, however, forced to trim its stake to 24% in 2019 to comply with foreign direct investment (FDI) regulations for ecommerce.

In August 2021, both Amazon and Catamaran jointly said they will not renew the joint venture. Subsequently, in December, Amazon said it would buy out Catamaran’s stake in the unit.

With CCI’s clearance on Amazon buying Catamaran’s 76% in Cloudtail parent Prione coming through in March, Cloudtail cannot legally be a seller on the India marketplace as the existing rules do not allow that.

In the financial year 2021, Cloudtail’s revenue increased by more than 45% to Rs 16,639 crore with a profit of more than Rs 182 crore. Cloudtail was credited for shipping over 50% of total sales on Amazon India at one point before the government tightened rules in 2016, stipulating that a single seller cannot account for more than 25% of total sales on an online marketplace.

Meanwhile, Appario Retail which is also a large seller on the Amazon India marketplace recorded a revenue of Rs 14,628 crore in FY21 with a profit of Rs 54 crore.