US founder and CEO of Amazon.com Jeff Bezos in Bangalore on September 28, 2014. Image: Manjunath Kiran/AFP via Getty Images
MUMBAI, India — Amazon’s founder and chief executive, Jeff Bezos, is visiting India this week for the first time in more than five years.
Instead of garlands, India’s government is welcoming him with a new antitrust case.
The Competition Commission of India, the country’s antitrust regulator, opened a formal investigation on Monday into the practices of Amazon and Flipkart, the Indian e-commerce giant mostly owned by Walmart.
The inquiry was prompted by complaints from an association of small traders, after several rounds of regulations failed to curb the market power of the two e-commerce platforms, particularly in the online sales of mobile phones. Indian merchants have lobbied Prime Minister Narendra Modi to take tougher action against the companies.
India requires foreign-owned e-commerce firms to be neutral marketplaces, much like eBay, to protect local retailers and distributors from deep-pocketed competition. In the United States, Amazon both operates a marketplace and sells many products — including diapers, batteries and books — like a traditional retailer, buying them wholesale and then reselling them to consumers. Under Indian law, the site is supposed to rely on independent sellers who post their products on Amazon.
But both Amazon and Flipkart give preference to some sellers, the Indian regulator said, by using affiliated companies, discounts and their global relationships with manufacturers to influence who sells what and at what price.
For example, Amazon sells its own brands, like AmazonBasics luggage and Solimo paper products, on its Indian site through companies in which it holds an equity stake. And Flipkart features a small group of preferred, high-volume sellers on its service.
The commission will investigate whether those arrangements violate India’s antitrust law.
India is one of Amazon’s fastest-growing markets as well as an important location for its customer service and research operations. But Bezos has made just three trips to the country.
On Wednesday, he is expected to discuss opportunities for small businesses on Amazon at a conference in New Delhi. He is also expected to meet Modi and plans to travel to Mumbai, home to India’s Bollywood film industry, to rub elbows with Bollywood stars like actor Shah Rukh Khan and director Zoya Akhtar.
In a statement, Amazon said, “We welcome the opportunity to address allegations made about Amazon; we are confident in our compliance, and will cooperate fully with C.C.I.”
Flipkart said it was complying with all laws in India governing e-commerce and noted the large number of sellers on its platform. “We take pride in democratizing e-commerce in India,” the company said in a statement.
Amazon, the world’s biggest online retailer, faces other antitrust inquiries around the world. The scrutiny in Europe and the United States has also focused on its relationship to its third-party sellers, which account for about 60% of sales.
The Federal Trade Commission and the House Judiciary Committee are examining whether Amazon treats unfairly sellers that do not use some of Amazon’s services, such as its fulfillment network. The European Union’s antitrust commission has opened an investigation into whether Amazon misuses information from its marketplace sellers to decide what products it sells directly to customers, including its own private-label offerings.
Amazon has maintained that it faces strong competitors, such as Walmart, and is a small player in the overall retail market, which is still dominated by physical stores.
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