Jeff Bezos’ Not So Excellent Indian Adventure: Modi Government Disses Inept Amazon

By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She is currently writing a book about textile artisans.

Jeff Bezos visited India last week, bearing the gift of of an Amazon offer to invest one billion dollars and create jobs to an India that faces its worst economic prospects  — slowing growth, rising unemployment, moribund investment – in at least twenty years.

He didn’t receive a fawning reception.

The day before he arrived, the Competition Commission of India initiated an investigation into Amazon, for alleged violations of competition law, as reported by livemint  in Amazon, Flipkart to be probed for abuse of competition law

The Competition Commission of India (CCI) on Monday ordered a probe into alleged competition law violations by Amazon and Walmart-owned Flipkart over allegations that the e-commerce majors promoted and gave discounts to “preferred” sellers, entered into exclusive partnerships with smartphone brands and abused their dominant position.

CCI noted four alleged practices on both the marketplaces—exclusive launch of mobile phones, preferred sellers on the platforms, deep discounting and preferential promotion of private labels.

The antitrust body said such exclusive arrangements between smartphone or mobile phone brands and e-commerce platforms or select companies selling exclusively on either of the platforms merit an investigation.

“It needs to be investigated whether the alleged exclusive arrangements, deep-discounting and preferential listing by the OPs (opposite parties) are being used as an exclusionary tactic to foreclose competition and are resulting in an appreciable adverse effect on competition contravening the provisions of Section 3 (1) read with Section 3(4) of the Act,” the CCI order stated.

Bezos’ visit was his first to India in five years, and Prime Minister Narendra Modi declined to meet with him – even though last month,  Amazon requested such a meeting. Other senior ministers followed Modi’s lead and also said no to meeting with Bezos, according to The Print in Why no one in Modi govt met Amazon’s Jeff Bezos this time and instead rudely snubbed him:

Amazon Inc. chief executive Jeff Bezos may have announced his e-commerce giant’s massive investment plans for India but that has not stopped the Narendra Modi government from giving him a cold shoulder, in a rare instance of the regime not welcoming a foreign investor.

Bezos, who is on a three-day visit to India, had sought meetings with top government leaders but the appointments were not given, sources told ThePrint.

During the ongoing visit, the world’s richest man has not met either Prime Minister Narendra Modi or any senior cabinet ministers. This is unlike his previous 2014 visit when the Amazon chief had met PM Modi. At the time, Bezos had committed to invest $2 billion in India.

Now, perhaps  part of the reason for the snub was the government’s dissatisfaction with its coverage by the Bezos-owned Washington Post. As BJP official Dr Vijay Chauthaiwale tweeted:

One Billion Dollars Doesn’t Even Cover Amazon’s Losses

Stinging comments by commerce and industry minister Piyush Goyal make clear that the Modi government’s stance toward Amazon is driven by far more than concern over its Washington Post coverage. As India’s leading financial paper, the Economic Times tells the story  in Amazon not doing a favour by investing $1 billion: Piyush Goyal:

Commerce and industry minister Piyush Goyal said Amazon was not doing India any favours a day after the company’s CEO Jeff Bezos pledged to invest an additional $1 billion in the country, adding that this was probably on account of a need to fund losses, remarks that are likely to be seen as a stinging rebuke to the world’s richest man.

“How can a marketplace make such a big loss unless they are indulging in predatory pricing or some unfair trade practices? These are real questions which will need answers,” Goyal said. “They are investing money over the last few years also in warehousing and certain other activities, which is welcome, it is good, but if they are bringing in money largely to finance losses and those losses in an ecommerce marketplace model, a fair marketplace model in a turnover of $10 billion, if you are going to have a loss of a billion-billion and half dollars, it certainly raises questions, where the loss came from.”

Goyal elaborated further

“They may have put in a billion dollars but if they make a loss of a billion dollars every year, then they jolly well will have to finance that billion dollars,” Goyal said in the Capital on Thursday, underscoring the government’s hostility to marketplaces that allegedly violate rules. “So, it is not as if they are doing a great favour to India when they invest a billion dollars.”

The minister said he had told investors several times to follow the letter and spirit of the law and not to seek out loopholes when “we have very clearly articulated the ecommerce marketplace model”.

Bezos Performance Inept

Bezos performance in India was spectacularly inept – it was both mishandled and mis-times.  He promised  a billion dollars in investment, but by failing to acknowledging that this sum would also fund losses, his statement came off as being a mere stunt, made for effect.  Given the scope and reach of Amazon’s activity he should have been more careful to understand the competition issues, and try and to build relationships with Indian regulators.

Bezos had the opportunity to figure out what he needed to say to Amazon India and about Amazon in India. Instead, the did a little soft shoe shuffle for the natives – this neither set either the right tone or achieve anything significant other than stir the hackneyed concerns of a new way of colonizing India.

Few need reminding that India has endured a long history of exploitation by foreigners – and remains understandably wary of their offerings. (For a fascinating account of a  part of this history – the depredations of the East India Company, for example – I can highly recommend William Dalrymple’s latest, The Anarchy: The Relentless Rise of the East India Company.)

Now, Indians I’ve discussed this visit with – either via email or ‘phone – see Bezos ‘ performance as exemplifying a particular patronizing attitude towards doing business in India. I’m not sure that’s the case.  Bezos is accustomed to having most politicians, and regulators, for that matter, accommodate him. So his “cowboy” swagger through India is just part of his way of doing business, his way  of seeing the world. He might actually have accomplished something with his visit if he had taken a more considered approach. Google and Microsoft seem to have a better read on things. But he didn’t. And I think it’s because he just doesn’t’t have it in him to act in a more thoughtful way.

Protection for Small- and Medium-Sized Enterprises

Let’s step back and look at the problem the Modi government is confronting.  Small and medium-sized traders are a crucial source of support for Modi’s Bharatiya Janata Party (BJP). Maintaining their allegiance is especially crucial in the run-up to Delhi Assembly elections. And here Goyal has a point, as a column in today’s Indian Express, Where Piyush Goyal is right: investments in infrastructure is different from money brought in to finance losses,  makes plain:

It’s possible that the minister’s harangue against Amazon was aimed more at small shopkeepers and traders, the ruling BJP’s original support base, ahead of the Delhi Assembly elections. But the basic concern — that the price points on many products offered on Amazon’s or Flipkart’s platforms are below even the cost price for ordinary brick-and-mortar retailers — is a valid one. If much of the new investments are only funding the losses from such deep discount sales, which are simultaneously undermining the operations of traditional kirana stores, it is a serious allegation.

The column does delve into the weeds on the financing of those small mom-and-pop outlets, the kirana:

The viability of mom-and-pop outlets — the country has an estimated 12 million of them — has primarily rested on three things. The first is low overheads: Kiranas are predominantly family-run enterprises employing one or two hands (“chhotus”), not paying rent on their own little shopping premises, and avoiding taxes by dealing in cash. The second is maximum space utilisation: The small retailer’s focus isn’t his store’s layout or appeal as much as ensuring the highest possible sales per square foot. That would mean packing, say, 200 items or SKUs (stock keeping units) within a 200 sq ft area.

But it is the third USP — high inventory turnover and working capital rotation — that is least appreciated….

The column spells out in detail how these outlets operate, as well as the threat Amazon’s operations pose to them. due to space considerations – and my desire not to lose  casual readers – I’m not going to explore these operations further here. This Indian Express column does the analysis, and I refer interested readers there.

The key conclusions is this:

India’s small retailers were badly bruised by demonetisation and the goods and services tax, while the ones in the mobiles and electronics business have simply been unable to take on Amazon or Flipkart. The Narendra Modi government is now seemingly trying to make amends. Goyal’s sanctimonious pronouncements are basically an outreach exercise to the BJP’s oldest constituency. By drawing a distinction between so-called genuine investment and investments to fund losses from heavily discounted sales, his government has put the big global e-retailers on notice.

I’ve written before about  Modi economic policy missteps – such as the cackhanded and misguided demonetisation exercise, and the botched goods and services tax rollout. These smacked small and medium sized enterprises hard, due to a tax change implemented in an attempt to curb black money (see this accounting The Telegraph, DeMo levy hurts small units).

But the bottom line is that Modi’s government has not rolled over for Amazon (as I discussed in India Forces Amazon to Choose Between Operating e-Commerce Platform and Selling Goods on that Platform). And instead, the competition commission has initiated investigations of Amazon And Flipkart, which are ongoing.

Grey Lady Misses the Point, Chalks it All Up to Nationalism

I’ll point out that if you read the NY Times account, of Bezos’ visit you would not find any mention of the economic and political considerations discussed here. Instead, the grey lady emphaszes  the Modi government’s beef with The Post, India Targets Jeff Bezos Over Amazon and Washington Post:

As to the economics issues affecting Amazon, and India’s small traders, the NYT ignores these and chalks the whole thing up to nationalism:

In the realm of business, the government has also taken a nationalistic approach, seeking to rein in the power of foreign technology giants like Facebook, Google, Amazon and Flipkart, an Indian e-commerce site purchased by Walmart in 2018.

Huh? That all these technologybehemoths just happen to be foreign companies seeking to operate in India isn’t the problem. The impact off their alleged anti-competitive practices on Indian markets and small- and medium-sized traders is.

To be fair, The NYT did cover the antitrust complaint in a separate and earlier article, Welcome to India, Mr. Bezos. Here’s an Antitrust Complaint. And Vindu Goel wrote both that  article and the account of the Bezos visit. Which makes it all that more curious that the serious substantive dispute over Amazon’s business practices is reduced to a matter of “nationalism”.

In his latest Indian jaunt, Bezos exemplified the Ugly American – and left India, with little to show from his visit.. Next time, he should avail himself of better advance work, and perhaps seek to address Indian concerns, rather than thinking the Indian government would be over the moon about his vague promises. A billion dollars sounds like a lot of money, and it is. But the Modi government failed to be bamboozled.

Goyal received some criticism for his bluntness with Amazon, and expanded further on his thinking to the Economic Times, Remarks on Amazon won’t send wrong signal to investors: Piyush Goyal:

Commerce and industry minister Piyush Goyal said promises of job creation by foreign-owned ecommerce companies need to be seen from the perspective of potential job losses as well, adding his remarks on Amazon will not send a wrong signal to international investors.

A day after Amazon CEO Jeff Bezos had announced a $1billion investment to digitise small Indian businesses last week, Goyal said the US company was not doing India a favour and that it was doing the investment to primarily fund its losses.

Amazon has said it wants to create one million new jobs in India by 2025. Speaking to ET before he leaves for Davos for the World Economic Forum’s summit, Goyal said many people are talking about jobs. “But I still look at the jobs from the perspective of jobs lost also,” he said.

“So, I cannot create 700,000 jobs by breaking the law, breaking every anti-competitive restriction, monopolising certain markets, causing millions of jobs to be potentially lost, incurring huge losses which I am bound to of course finance, and bring in foreign direct investment (FDI) and then claiming that I have a right.”

Goyal discussed some of the competition law considerations:

“Can you imagine (companies) that are worth Rs 70 lakh crore, with deep pockets at almost zero-cost capital competing with small retailers who pay interest in double digits to the banks and are still trying to make a livelihood for their families?”

The minister restated that it is expected that large companies will respect the law of land.

Overseas-funded ecommerce marketplaces can’t engage in retailing goods themselves and can only function as platforms for buyers and sellers. Small shopkeepers accuse Amazon and Walmart-owned Flipkart of breaking the rules and driving them out of business through predatory discounts, prompting the government to tighten norms and increase oversight.

“It is a very clearly stated legal position. Now, if anybody in the garb of B2B creates associated companies, related parties, tries to find loopholes within the law through flash sales or through circumventing the restriction on B2C- through innovative structures, I certainly think it’s my duty to point that out to them,” Goyal said, urging all stakeholders to study the entire issue in the right perspective of the law of the land.

Would that US regulators cast a similarly jaundiced eye over Amazon’s promises.

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18 comments

  1. chuck roast

    In 2000, when The Atlantic Monthly was still worth reading, William Langewiesche publish an article called The Shipbreakers. It was about one of the southeast Asian beaches where redundant tankers and merchant ships go to die. Human hands turn these leviathans into re-bar. This is a human and environmental horror story of epic proportions. Here is a line in the story that has stuck with me all these years…

    The workers were quite obviously exhausted by it. Some, I think, were slowly starving, trapped in that cycle of nutritional deficit all too common in South Asia, by which a man may gradually expend more calories on his job than his wages will allow him to replace.

    This is a future that is already here in India. And frighteningly enough, this is the ultimate neoliberal dystopian future. First Queens and now India. People are wising-up to this guy.

    https://www.wesjones.com/shipbreakers.htm

    Reply
    1. Savedbyirony

      Recently read his “The Outlaw Sea”. Really good book which includes his writings on shipbreakers as well as all sorts of other workers at sea. I remember that quote well and thinking “nutritional deficit” is not the only deficit in people’s lives certain employers (Bezos being one of the most notorious) are adapt in creating.

      Reply
  2. Tomonthebeach

    I could not help but notice a physical similarity between Bezos and the fictional “Daddy Warbucks” of Orphan Annie infamy. Sadly, the similarities spill over to greed and exploitation too.

    This article begs a big question. Whyizit Bezos is getting away with the same monopolistic behavior in the USA? I thought we had laws for that LOL.

    Reply
    1. Conrad

      Because the USA has abandoned the quaint notion of making billionaires subject to the same laws as the little guys and India has not?

      Reply
      1. notabanktoadie

        Equal protection under the law went out the window with government privileges, both explicit* and implicit**, for private credit creation.

        * e.g. government provided private deposit guarantees.
        ** e.g. failure on the part of government to provide basic fiat storage and transaction services for all citizens.

        Reply
        1. skippy

          Postal banking was ended when it was thought some had learned their lessons …. then MPS saw its chance …

          It would seem neither banks or money had anything to do with it, rather just a reflection of the aforementioned world view.

          https://larspsyll.wordpress.com/2020/01/18/quinn-slobodian-and-the-birth-of-neoliberalism/

          Albeit reality is dynamic and cookie cutter world views can collide in never ending attempts to present failure as victory to the unwashed.

          Reply
  3. Clive

    It’s astonishing how often brands jump the shark. Amazon has stopped even trying to make itself appealing, here in the UK the service offer from Amazon as a retailer is derided — anecdotal, but everyone I has spoken to about Christmas presents has either adopted an “Amazon, only if no-one else can supply the goods” approach or is simply not using them. The clunky, awful website. The nonexistent customer support. The ambiguity as to whether you’re being supplied by Amazon themselves or a “marketplace” operator. The random number generator pricing. If Amazon has a redeeming quality, I can’t find it.

    It seems only AWS is what’s keeping Bezos interested in actually running the company semi-effectively. And you’d think his PR minders would tell him to keep away from media appearances. He is completely hopeless as a communicator. It’s like he’s some kind of empathy black hole. He just sucks all sense of humanity out the room, merely with his very presence. Probably he’s too arrogant to pay any attention to his media advisory team. Or they’re too afraid to tell him the truth.

    Well done India (first time in recorded history Modi has done anything useful as far as I’m concerned) for telling them to take a hike.

    Reply
    1. notabanktoadie

      It’s astonishing how often brands jump the shark. Clive

      If you mean sell out their good name, I’d say the root cause is the need for “jawbs” and the need to justify those via cost savings at the expense of quality.

      Most people would rather do good, imo, but survival trumps that, especially of one’s family.

      The solution is economic justice so that one can easily say “Take this job and shove it. I don’t need to sell my integrity.”

      It isn’t always or even usually about greed, imo, but desperation.

      Reply
      1. cnchal

        > . . . I don’t need to sell my integrity.”

        If you can live by that, you are rich. The problem of working for Amazon is that you can have the highest integrity, yet the brutal working conditions will end up damaging employees, for life in many cases. Amazon isn’t buying your integrity. They are buying your body to do physical work and even were Amazon to slow the pace in half, it would still be too fast to survive it as a worker.

        Economic justice to me looks like Amazon get’s unionized, Wall Street freaks out, crashes Amazon stawk and exposes the whole thing as an elabortae scam, propped up by taxpayers and the FED.

        Reply
    2. ChrisPacific

      It does serve as something of a warning flag for companies making large bets on AWS for their cloud infrastructure (which is a lot of them). They are (mostly) very good right now, but so was the Amazon marketplace back in the day – in fact it used to be the gold standard for exceeding customer expectations. If their online retail business can take such a dive, then it could happen to other business lines as well.

      I would say that large business customers are more influential and less subject to exploitation than consumers, but Amazon is so massive these days that I’m not sure that’s true in relative terms. And Oracle has already demonstrated that rent extraction in infrastructure can be a very profitable business in the short to medium term if you’re willing to sacrifice long term potential and customer goodwill. You have only to look at the current state of their online retail business to see where Amazon stands on that question.

      Reply
  4. The Rev Kev

    Maybe Bezos told India that he is going to for them what he did for America. Undercut every single current business in India, become a dominant monopoly in India itself, halve all Indian wages, destroy all small companies in the sub-continent unless they defer to him, and then send Modi a bunch of dick-pixs in a “What are you going to do about it?” gesture.
    The Indians that I have met live for business so the idea that Dr. Evil wants to muscle in on their territory for what is to him pocket-change is both a non-starter and an insult.

    Reply
  5. RBHoughton

    There is a change that has come over India and I believe its all due to Modi. For the first time an honest man is in charge of Hindustan and he’s reassuring and encouraging a great many civil servants who were formerly in expectation of being abused or sacked for doing their jobs. I suppose this bold confrontation with Amazon is an aspect of that great change. Its not some trite comments in the WaPo newspaper.

    One of the fundamental needs of the people is ensuring they get good and precise information. That’s not something Amazon would be much concerned about but I believe Modi really is. He has plans. He knows where he wants to go and a supportive civil service will get him there. So, for my penny’s worth keep an eye on India and its policies. It ma be part of some great changes coming to this planet.

    Btw Ms Scofield – many thanks for the recommendation of William Dalrymple’s scholarship. We are finally getting India right.

    Reply
  6. Lambert Strether

    > the basic concern — that the price points on many products offered on Amazon’s or Flipkart’s platforms are below even the cost price for ordinary brick-and-mortar retailers — is a valid one. If much of the new investments are only funding the losses from such deep discount sales, which are simultaneously undermining the operations of traditional kirana stores, it is a serious allegation.

    “Your margin Is my opportunity” –Jeff Bezos (attributed)

    Reply
  7. Synoia

    Modi is smart. From what I read and infer, Modi believes that having many successful small business people in their distribution system is better than having another few million million disgruntled semi-employed, wile paying a significant portion of the distribution income to Bezos.

    Reply
  8. raul

    The modi government seems to be in the pocket of the US and a member of the global fascist alliance. While this analysis may well be right it could also just be Trump leaning on Modi to be mean to Bezos.

    Surely if it was a matter of washington post coverage the Indians would drop a few juicy bits to Bezos – or at least attempt to – to get their way. If it is a matter of national interests or competition issues they would engage in some kind of diplomacy and deal making and at least meet him for the optics.

    The kind of brazen snub suggests something else is afoot.

    Reply

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