Amazon is facing an antitrust case in India, filed by a group of more than 2,000 online sellers, alleging the US e-commerce giant favours some retailers whose online discounts drive independent vendors out of business, according to a legal filing seen by Reuters.
The All India Online Vendors Association, members of which sell goods on Amazon (AMZN) and Flipkart, allege Amazon engages in unfair business practices. The group claims that Amazon India’s wholesale arm buys goods in bulk from manufacturers and sells them at a loss to sellers such as Cloudtail. Such sellers then offer goods on Amazon.in at big discounts.
“This anti-competitive arrangement … is causing foreclosure of competition by driving independent sellers out of the market,” the group alleged in its Aug. 10 filing seen by Reuters.
The case adds another regulatory challenge for Amazon in India, where it has committed $6.5 billion in investment but is battling a complex regulatory environment.
In January, the Competition Commission of India (CCI) had ordered an investigation of Amazon and rival Flipkart, owned by Walmart, over alleged violations of competition law and certain discounting practices, which Amazon is challenging, according to court filings.
India’s regulations allow Amazon to operate an e-commerce marketplace where sellers can list goods for a fee, the report said.
India tightened regulations last year to deter steep discounts, but small sellers still say Amazon uses complex business structures to bypass restrictions, an allegation the company denies.
In addition, the seller group alleges that Amazon charges lower fees to selected sellers, which effectively makes it difficult for independent online retailers to compete on its website.
Cloudtail, one of Amazon’s biggest India sellers, pays a fee to Amazon of 6.3% for electronic products, while independent sellers pay roughly 28.1%, the group alleged in its filing.
Amazon has said it helps to provide an e-commerce platform in India to more than 650,000 sellers who make their own pricing decisions while listing goods. Shares in Amazon have been on a steady winning streak jumping a stellar 81% so far this year, with the $3,725.59 average analyst price target implying another 11% upside potential is lying ahead in the coming 12 months.
Stifel Nicolaus analyst Scott Devitt recently raised Amazon’s price target to $3,500 from $3,300 and maintained a Buy rating saying that the stock remains one of his favorite large cap growth names. Devitt views Amazon is well-positioned to continue to benefit from the accelerated shift to e-commerce and cloud services.
“The environment for e-commerce remains favorable as the ramifications of the pandemic are staying with us for longer than anticipated. While some have concerns of deceleration in the AWS business, we believe the weaker economic backdrop will lead more customers looking to adopt cloud services to lower costs,” Devitt wrote in a note to investors. “The continued migration will be gradual over time. As the leader in e-commerce and cloud services, Amazon remains a core holding.”
Overall, AMZN scores 38 Buy ratings from analysts versus 1 Hold rating adding up to Strong Buy consensus. (See Amazon stock analysis on TipRanks).
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This article was originally posted on TipRanks