Amazon to Shut Down Appario Amid Allegations of Circumventing Indian Law

In a joint statement released on October 31st, Amazon has announced that it will close Appario, one of the biggest sellers on its platform in India. 🤔

The brand is a unit of Frontizo Business Services, an Amazon and Patni Group joint venture that started in 2017. 

A Move to Minimize Regulatory Pressure

For years, Amazon has been in the crosshairs of antitrust regulators for allegedly giving preferential treatment to a few sellers and using them to circumvent Indian laws. 

Leaked internal documents reviewed by Reuters show that in 2019, Amazon exec Jay Carney was “cautioned not to divulge that some 33 Amazon sellers accounted for about a third of the value of all goods sold on the platform,” to India’s ambassador to the US, as that information was “sensitive/not for disclosure.”

Other documents also reveal that Amazon had indirect equity stakes in two more sellers on the platform (24% in Frontizo and 26% in the now-delisted Cloudtail, internally called as “special” merchants). These two sellers also accounted for about 35% of the site’s sales revenue in early 2019. They were also allegedly given “discounted fees and exclusive access to Amazon’s retail tools for inventory management,” to stay ahead of the competition.

Recent changes to India’s foreign direct investment regulations threatened to disrupt Amazon’s business operations in the country. One of the new rules that came into force in 2016 prohibits a single seller to have more than 25% of total sales for any online marketplace, forcing Amazon to sweep that “sensitive/not for disclosure” information about Cloudtail and Appario under the rug.

Another recent change to domestic regulations now also involves not allowing marketplaces to have controlling stake in sellers on their platform.

To prevent further scrutiny, Amazon reduced its stake in Cloudtail – registered as Prione Business Services, a joint venture with Catamaran Ventures providing support systems for sellers – from 49% to 26% and in Frontizo from 49% to 24%.

However, in early 2021, the Competition Commission of India (CCI) approved Amazon’s acquisition of its partner’s entire stake in Prione Business Services, prompting it to close Prione’s B2C retail unit Cloudtail.

Now, Amazon appears to be making the same move with Frontizo/Patni Group joint venture by delisting Appario to possibly avoid more stringent foreign investment laws and disruption to its operations (e.g., India’s antitrust authorities raiding Appario office as part of its investigations into the company’s anti-competitive behaviors) 🚨

According to an Amazon spokesperson, “The partnership with the Patni Group is the next step in our strong ramp up to support Amazon’s vision to transform the way India buys and sells. The Patni’s have a strong track record of building large-scale operations for IT-enabled services and understanding of India as a market.”

Therefore, it’s crucial for the partners to “continue to explore new business opportunities, including helping businesses across India to scale up their online presence,” even if that meant delisting Appario as a seller within the next 12 months.

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