Amazon is seeking Indian antitrust watchdog’s approval to buy Catamaran Ventures’ stake in Prione, which operates one of the largest sellers on the e-commerce platform, months after the two firms said they won’t renew their joint venture after May next year.
The announcement comes as a surprise as Catamaran owns 76% stake in Prione. Amazon earlier held 49% stake in the company, but diluted it down to 24% to comply with the local laws that prohibit e-commerce firms from having a direct or indirect ownership in businesses that sell on their marketplaces.
In a joint statement Wednesday, the two firms said they are complying with the applicable laws “including all assets and liabilities” to close the deal and have sought the regulatory approval. Amazon has reached out to the Indian watchdog Competition Commission of India for the approval, a person familiar with the matter said.
Billionaire N.R. Narayana Murthy’s Catamaran and Amazon launched the joint venture in the country in 2014. The joint venture restructured its ownership in 2019 following India’s regulatory changes. In August this year, the two said they were ending the relationship.
That announcement came after news agency Reuters reported, citing Amazon documents, that the American e-commerce firms had given preferential treatment for years to a small group of sellers including Cloudtail and had used them to bypass Indian laws. The Competition Commission of India, separately, ordered an investigation into Amazon and Flipkart 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. The two firms made an unsuccessful attempt to dismiss the investigation.
“The businesses of the joint venture shall continue under the leadership of the current management and on receipt of regulatory approvals, the board of Prione and Cloudtail will take steps to complete the transaction in compliance with applicable laws,” the joint statement from Amazon and Catamaran said today.
Cloudtail is one of the largest sellers on Amazon in India. It has enabled over 300,000 sellers and entrepreneurs to go online and provided 4 million merchants with digital payment capabilities, the two firms said earlier this year.
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. (New Delhi has yet to follow up on the new rules.)
Amazon has stakes in a few more third-party sellers, including Appario Retail, which is its joint venture with Patni Group.
Originally published at techcrunch.com