New FDI norms in e-commerce: Amazon's JV with Catamaran in Prione Business Services undergoes rejig; Cloudtail makes a comeback

New Delhi: Amazon’s joint venture with Catamaran Ventures, Prione Business Services, which runs one of Amazon.in’s largest sellers Cloudtail, has been restructured to meet compliance with new FDI rules for e-commerce introduced earlier this month, according to sources. Sources said NR Narayana Murthy’s Catamaran Ventures has hiked its stake in Cloudtail’s parent company Prione Business Services, with Amazon’s holding coming down from 49 percent to 24 percent stake. With this, Cloudtail ceases to be an Amazon group company, and can continue selling on Amazon’s marketplace in India, sources added. In a statement, Catamaran Advisors CEO Abishek Laxminarayan said that Catamaran has always been fully compliant with every law and will continue to do so in the future. [caption id=“attachment_4501191” align=“alignleft” width=“380”] Representational image. Reuters[/caption] “…on 26 December, 2018, the Government of India revised the laws governing e-commerce marketplaces. On 6 February, 2019, Catamaran has effected the required changes to be 100 percent compliant with PN2 (Press Note 2). We regret the inconvenience caused to our suppliers and customers due to the stoppage of the operations of Cloudtail India between 1 February, 2019 and 6 February, 2019,” Laxminarayan said. The statement, however, did not divulge details of the nuances of the equity rejig that was undertaken. Another large seller Appario is also expected to return to Amazon.in after the restructuring is completed, the sources said. Appario is a subsidiary of Frontizo - a joint venture company where Patni Group is the majority holder while Amazon is the minority shareholder. Meanwhile, the Confederation of All India Traders (CAIT) has alleged that Amazon’s latest move is a “circumvention of new rules”. “CAIT has taken a very serious note of reports of Amazon reducing its stake in Prione thus trying to disassociate itself from Cloudtail,” CAIT said in a statement dubbing the latest rejig as alleged circumvention of new norms. CAIT said it will approach the Commerce Ministry demanding that the government again clarify that online retailers should not hold direct, or indirect stake, in its vendors. When contacted, Amazon India said in a statement that it remains committed to complete compliance with all the laws of the land, including Press Note 2. “We have no equity participation in any seller company on our marketplace nor does any seller buy more than 25 percent of its inventory from our wholesale business,” the statement added. The government has announced new regulations that would bar online marketplaces with foreign investments from selling products of the companies where they hold stakes, and ban exclusive marketing arrangements. Another provision states that the inventory of a vendor will be seen as controlled by a marketplace, if over 25 percent of the vendor’s purchases are from the marketplace entity, including the latter’s wholesale unit.