INTRODUCTION

A legal investigation of the legal department at the Indian branch of the world’s largest online retailer Amazon has been launched following allegations of bribery. The corporation is accused of paying legal costs to corrupt officials at all levels across the nation. Government sources estimate that the legal fees paid by six Amazon entities over the course of two financial years are nearly equal to 20.3 percent of the revenue claimed with legal fees that have cost Amazon more than Rs. 8,500 crore in two years. The Competition Commission of India is already investigating Amazon for suspected anti-competitive behaviour, exploitative pricing, and preferential treatment of vendors. In addition, Amazon is suing the Future Group for a $24.713[1] billion transaction with Reliance Retail, Amazon’s Indian retail competitor as Amazon is an investor in Future Coupons, which is a shareholder in Future Retail. Amazon may have misled its Indian ties and offered preferential treatment to a minority of Indian sellers so that they could circumvent increasingly strict foreign investment restrictions.

FINANCIAL DATA

Amazon Seller Services Private Limited, based in Bengaluru, reported the most money paid out among the five companies. In the financial years 2018-20 and 2019-20, it paid Rs 1,448 crore and Rs 1.969 crore in legal fees, respectively, against revenue of Rs 7,800 crore and Rs 11,000 crore. There was a payout of Rs 1,145.1 crore in 2017-18. According to the financial filings, other Amazon companies also experienced hefty legal expenditures. The US e-commerce powerhouse is also thought to have initiated an investigation into the accusation made by a US website. The business spokesperson of Amazon stated that the situation was being investigated internally along with that,  Amazon has requested its senior corporate counsel to take a leave of absence as part of its internal probe. As per financial documents, Amazon Retail India Private Limited increased its expenditure on “legal professional charges” paid nearly Rs 5,220 crore from 2017-18 to 2019-20[2].

GOVERNMENT’S STATEMENT

Although government sources claim that Amazon’s companies spent more than Rs 8,000 crore in “legal professional fees” in 2018-19 and 2019-20, a thorough analysis of the financial statements shows that sum was just over Rs 5,220 crore in 2017-18, 2018-19, and 2019-20.  The government has a zero-tolerance policy towards any form of corruption, according to government sources. Furthermore, the government includes the timing and location of the alleged offence in the documents, indicating that the company has spent more than Rs 8,500 crore on legal fees.

DEMANDS BY THE CONFEDERATION OF ALL INDIA TRADERS

The Confederation Of All India Traders (CAIT), representing 70 million traders has written to Union Commerce Minister Piyush Goyal, demanding an investigation into the claims, alleging they jeopardize the government’s reputation and go against the government’s vision for eliminating corruption. Furthermore, the traders’ organization has requested that the officials responsible be identified and punished. A “fair and independent investigation” is also being demanded by CAIT by US Securities and Exchange Commission Chairman Gary Gensler.

According to CAIT, government officials must guard the country’s e-commerce marketplace and retail industry from undue influence, abuse of dominance, and collusion with officials, because these actions are illegal under the Anti-Corruption Act. ‘Amazon’s internal probe stems from the company’s admission of paying government officials. In an effort to keep the Indian e-commerce market and retail trade free from excessive influence, abuse of dominance, and collusion with government officials, the Anti-Corruption Act was passed which has to be adhered to strictly by every enterprise irrespective of their market value and share.

AMAZON’S TAKE

A spokesperson for Amazon declined to comment on specific allegations or the status of the investigation when asked about exorbitant legal expenses used to pay bribes uncovered by a whistleblower on the day of the allegation raised. Subsequently, Amazon has confirmed that the company’s public account filings were “misquoted” as it relates to its e-commerce giant’s legal and professional services provided to Indian entities.

After various news outlets misrepresented a line item in the statutory filings regarding legal fees as stated by the Amazon sources, Amazon clarified the line item is actually referred to as legal and professional expenses, which include not only legal fees but also costs for outsourcing, tax consultants, customer research, and logistic support.

INTERNATIONAL DEVELOPMENTS

The US Department of Justice has indicted six individuals for conspiring to pay Amazon employees and independent contractors to obtain an unfair advantage on Amazon’s online marketplace. As reported by federal authorities, the individuals have used bribery and fraud to benefit third-party merchants selling goods on Amazon’s marketplace since at least 2017. According to the indictment, in other circumstances, individuals collaborated with Amazon personnel to reintroduce suspended products that had been reported as hazardous. As a result of the alleged conspiracy, the people received unfair competitive advantages for third-party seller accounts worth more than $100 million. Amazon workers are accused of bribing employees to gain access to privileges by violating its laws regarding third-party sellers. Department of Justice charges that Amazon employees boosted third-party sellers’ storage limits in Amazon warehouses, allowed them to sell products in restricted categories, and provided sellers with “inside knowledge” about the most profitable ad campaigns and products. It has been reported that Amazon employees have been involved in internal corruption. In 2018, the Wall Street Journal reported that Amazon was investigating whether employees laundered data and paid bribes to third-party sellers for the customer data.

REFERENCES

  1. ‘Trade Body Demands Inquiry Into Amazon India’s Bribery Charges | DH Latest News, DH NEWS, Delhi, Latest News, India, NEWS, International, Business, Life Style, Special, Business , Cbi, Bribery, Amazon, Trade Body’ (East Coast Daily English, 2021) <https://www.eastcoastdaily.in/2021/09/21/trade-body-demands-inquiry-into-amazon-indias-bribery-charges.html> accessed 29 September 2021
  • ‘”Zero Tolerance” For Corruption: Government To Probe Amazon Bribe Charge’ (NDTV.com, 2021) <https://www.ndtv.com/india-news/government-on-amazon-bribery-allegations-zero-tolerance-policy-towards-corruption-2547954> accessed 29 September 2021
  • ‘DOJ Charges Six People In Scheme To Bribe Amazon Employees To ‘Gain Upper Hand’ On Marketplace’ (https://www.cnbc.com/2020/09/18/doj-charges-six-people-in-scheme-to-bribe-amazon-employees.html, 2021) <https://www.cnbc.com/2020/09/18/doj-charges-six-people-in-scheme-to-bribe-amazon-employees.html> accessed 29 September 2021

[1] “Zero Tolerance” For Corruption: Government To Probe Amazon Bribe Charge’ (NDTV.com, 2021) <https://www.ndtv.com/india-news/government-on-amazon-bribery-allegations-zero-tolerance-policy-towards-corruption-2547954> accessed 29 September 2021.

[2]  ‘Amazon India Says It Will Investigate Bribery Charges, Trade Body Demands CBI Probe’ (India Today, 2021) <https://www.indiatoday.in/business/story/amazon-india-internal-investigation-bribery-charges-legal-fee-1855197-2021-09-21> accessed 29 September 2021.

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