Cloudtail to Shut Down: Amazon's Top Indian Seller Faces Regulatory Issues

Amazon and Cloudtail to Dissolve Joint Venture

A decision has been made by Amazon and Cloudtail, its prominent Indian seller, to discontinue their joint venture following May 2022. This announcement, released jointly by the two companies on Monday, arrived shortly after India’s Supreme Court mandated antitrust investigations into both Amazon and Walmart’s Flipkart within the South Asian market.

Origins of the Partnership

The partnership between Catamaran, the parent company of Cloudtail, founded by billionaire N.R. Narayana Murthy, and Amazon was initiated in India in 2014. A restructuring of the joint venture’s ownership occurred in 2019, responding to evolving regulatory changes within India.

Supreme Court Ruling

This development directly follows the Indian Supreme Court’s earlier ruling on the same day, compelling Amazon and Flipkart to confront the antitrust investigations previously ordered against them in the nation.

Antitrust Concerns

The Competition Commission of India, the nation’s regulatory body, initiated investigations last year. These investigations allege that Amazon and Flipkart favored specific sellers – those in which they held ownership stakes – on their platforms. Furthermore, concerns were raised regarding business practices that potentially suppress competition.

Cloudtail’s Impact

In a statement released Monday, the companies highlighted Cloudtail’s – officially registered as Prione Business Services – role in enabling over 300,000 sellers and entrepreneurs to establish an online presence. Additionally, the joint venture facilitated digital payment capabilities for more than 4 million merchants.

The collaboration reportedly provided merchants and small businesses with access to a vast customer base throughout India.

Future of Amazon’s Seller Network

Cloudtail stands as one of the largest sellers on Amazon India. Reports from the Economic Times indicate that Cloudtail will cease operations in the coming year. Amazon also maintains stakes in other third-party sellers, notably Appario Retail, a joint venture with the Patni Group.

Reuters has reported that Amazon is currently in discussions with the Patni Group to assess their interest in continuing the Appario Retail joint venture.

Statements from Leadership

M.D. Ranganath, president of Catamaran, stated, “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.”

The companies have not publicly disclosed the specific reasons driving the decision to terminate the joint venture.

Navigating Indian Regulations

Existing Indian regulations have historically restricted Amazon and similar e-commerce companies from directly holding inventory or selling products to consumers. To circumvent these restrictions, companies have utilized a network of joint ventures with local firms that function as inventory-holding entities.

Regulatory Changes and Impact

India addressed this regulatory gap in late 2018, a move widely considered a significant setback for Amazon within the country. This prompted Amazon and Flipkart to delist hundreds of thousands of items and restructure their investments in affiliated companies to be less direct.

Proposed Stricter E-commerce Rules

Further tightening of e-commerce regulations was proposed by India in June of this year. These proposals include prohibiting Amazon, Flipkart, and other e-commerce platforms from operating their own private label brands. The proposed rules also require these firms to ensure that related parties are not listed as direct sellers on their platforms.

A Vision of Digital Transformation

Amit Agarwal, Global Senior VP and country head of Amazon India, commented, “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.”