Amazon brings its own retailer Cloudtail back after tweaking structure to meet new FDI norms

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Published: February 7, 2019 6:22:29 PM

India's modified foreign direct investment rules that kicked in on Feb. 1, prevent companies such as Amazon from selling products from vendors where they, or their group companies, have equity holdings.

Amazon was forced to remove hundreds of thousands of items sold by top vendors Cloudtail and Appario as it indirectly held 49 percent equity stakes in both firms.

Benefitting from Amazon India changing its business structures to comply with India’s new e-commerce curbs, one of the biggest sellers made its return on the online retail giant, two sources told Reuters.

India’s modified foreign direct investment rules that kicked in on February 1, prevent companies such as Amazon from selling products from vendors where they, or their group companies, have equity holdings.

Amazon was forced to remove hundreds of thousands of items sold by top vendors Cloudtail and Appario as it indirectly held 49 percent equity stakes in both firms.

But on Thursday Cloudtail had returned with more than 300,000 products listed on Amazon, after the US e-commerce firm cut its indirect holding to 24 percent, one of the sources with knowledge of the matter told Reuters. The stake was bought by the majority holders, Catamaran Ventures, the source said.

“We have no equity participation in any seller company on our marketplace,” Amazon said in a statement, without sharing details of the changes in its indirect holding of Cloudtail.

Catamaran, an investment firm launched by Infosys founder NR Narayana Murthy, said it had made “required changes” to comply with the rules, but did not elaborate.

Amazon is working on a similar restructuring for the other big seller, Appario, a second source said.

The sources declined to be named as they were not authorized to discuss the same with media.

The new rules were introduced after complaints from small Indian traders who said Amazon and Walmart-owned online retailer Flipkart used their control over inventory from affiliated vendors to unfairly offer discounts.

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