Competition Commission of India Dismisses Antitrust Complaint against Amazon
On 11th September, the Competition Commission of India (CCI) dismissed a complaint of alleged unfair business practices against Amazon Seller Services Pvt Ltd, Amazon Export Sales LLC and Cloudtail India Pvt Ltd.
 
A case of alleged abuse of dominance by Amazon had been filed by the parent company of Dutch apparel brand Beverly Hills and Polo Club (BHPC). The complaint by Lifestyle Equities CV and Lifestyle Licensing BV had claimed that Amazon engages in deep discounting, preferential seller treatment, and allows the sale of counterfeit goods on its platform, all of which have hindered Beverly Hills and Polo Club’s entry into the 'online fashion retail' market in India.
 
Netherlands-based Lifestyle Licensing BV is the proprietor of the brand Beverly Hills Polo Club (BHPC), while Lifestyle Equities CV is its licensee, which in turn has appointed an exclusive licensee, Major Brands India Pvt Ltd for India. 
 
The informants had claimed that Amazon Sellers Service was creating unfair market conditions and barriers for market entry in India through its dominance on the online fashion retail space and its affiliates—Amazon Export Sales and Cloudtail India.
 
The complaint had also alleged that Amazon was selling counterfeit, unauthorised and unlicensed products of the BHPC brand at rates three times lesser than that of the original products. The company had claimed that the practice has caused reputational harm to the company.
 
It was also alleged that Amazon provided deep discounts on products sold through Amazon and Cloudtail while giving them higher search rankings and ensuring better customer reviews. This has also affected the competition within the suppliers’ market.
 
Cloudtail India (a joint venture of Amazon Asia Pacific Holdings and Infosys founder Narayan Murthy’s personal investment vehicle Catamaran Ventures) is the largest seller on Amazon. Amazon Asia controls less than 25% in the company.
 
The informants stated that they do not sell any of their fashion products under the BHPC brand on Amazon's e-commerce platform. Their informants are selling their fashion products only through their own website www.bhpoloclub.in and in the past sold through exclusive licensee and Tatacliq.
 
However, Amazon allegedly offered counterfeit/unlicensed/unauthorised products of the informants at 'unfair, discriminatory and/or predatory prices'.
 
The competition regulator, however, concluded that Amazon did not have a dominant position in the relevant market. CCI noted that vertical online fashion retail players such as Myntra, Ajio, Koovs etc held a market share of around 50%, while the combined share of horizontal online marketplaces, Amazon and Flipkart was around 35%, quoting a RedSeer report from June 2019.
 
The CCI order said “In the absence of dominance, the question of abuse of dominant position does not arise.”
 
While directing that the case be closed, the fair trade regulator said “It seems unlikely that the alleged conduct would have the alleged appreciable adverse effect on competition, to conclude a prima facie case of contravention”.
 
On the issue of reputational harm caused to the brand from sale of counterfeit products, “The issue does not lend itself to antitrust scrutiny,” the fair trade regulator said. The CCI asked the informants to address the issue with other appropriate legal or regulatory instruments.
 
Separately, on 10th August, the All India Online Vendors Association (AIOVA), an umbrella organisation of small traders, has also alleged in its filing that Amazon tends to favour select retailers who give online discounts that drive independent vendors out of business. 
 
Several sellers have earlier filed complaints against the e-commerce giant alleging anti-competitive practices by preferential treatment of seller entities like Cloudtail, Amazon Retail and Amazon Wholesale, where it either holds a stake or they are its group companies.
 
It has also been alleged that Amazon uses the data of products on its e-commerce platform to decide what to sell under its own brand.
 
 
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    COMMENTS

    m.prabhu.shankar

    1 week ago

    As per news, Amazon is going to buy 40% of Reliance Retail. Hence obviously, all the cases against Amazon will be closed shortly as well as should not be a surprise if the entire Central Cabinet receive Jeff Bezos in the airport next time when he visits India. Last time none of them met Jeff and there were some statements complaining about Amazon's practices as well by one of the ministers. But nothing any more. Amazon is Bharathiya from now on.

    Newme

    1 week ago

    eBay will give Amazon and Flipkart a run for their money. Unfortunately eBay is closed in India, Indian consumers are denied the benefit of direct purchase from Chinese suppliers.

    Pent-up Demand Supports Textile & Apparel Recovery in 2QFY20-21: Ind-Ra
    Indian textiles companies have significantly increased their plant capacity use in August 2020 with the easing of lock-down restrictions. The increase in demand in domestic and overseas markets will lead to recovery in textile and apparel industry during the second quarter (2Q) of FY20-21, says India Ratings and Research (Ind-Ra).
     
    In a report, the ratings agency says, "We expect both the segments’ volumes to have corrected to 50%-80% in August 2020 and reach 70%-80% of normal over September 2020, led by pent-up demand and strong export order build up in all the segments. Both man-made fibres and cotton segments should start benefitting from the low raw material prices in 3QFY21. We expect raw material prices to remain moderate in 2HFY21."
     
    Ind-Ra says it will continue monitoring the domestic demand recovery along with export markets in the US, Europe and China which are the major hubs for Indian textiles products.
     
    According to the ratings agency, textiles players’ weak profitability over the first half (H1) of FY20-21, along with supply chain disruptions, has impacted cash flows; while the moratorium announced by the Reserve Bank of India (RBI) under the COVID-19 relief package has provided the inevitable liquidity support. However, the lifting of moratorium from 1 September 2020 without the full recovery in cash flows would require additional caution and monitoring of cash flows, it added. 
     
    Ind-Ra says, "Some of such stressed issuers, mostly in the sub-investment grade rating category, may opt for the RBI announced one-time loan restructuring to survive the imminent liquidity challenges. We expect textiles players to record 15%-35% decline (year-on-year- y-o-y) in their top line and 20%-50% yoy drop in operating profits over FY20-21."
     
    During August 2020, prices of textile products have recovered broadly from the lows of April-May 2020. International cotton prices (US) continued to recover in August 2020 by 4% month-on-month (mom), after dipping in April 2020. Indian cotton prices increased about 5% m-o-m in August last week, following a partial correction in the international prices over July 2020. Cotton arrival is almost complete in the current season while Cotton Corporation of India (CCI) continues to procure to support cotton prices. 
     
    According to the ratings agency, plant utilisation of pure man-made fibres and yarn manufacturers was severely impacted over 1QFY20-21 amid the COVID-19-led lock-down. However, it says, volume recovery of pure man-made fibres and yarn should be quick but has started relatively late from August 2020, while the cotton and blended spinners’ volumes have started recovering from June 2020.
     
    Fibre and yarn prices have been steady in August 2020, while discounts are also offered in few segments to boost sales. Cotton yarn and blended yarn prices largely remained flat in August 2020, despite demand recovery as the supplies also increased steadily. Moreover, margins of large spinners could remain under pressure as their cotton season procurement was at about 10% higher prices and operating utilisations are still below optimum levels.
     
    Ind-Ra says it expects fabric and apparel prices to have declined in August 2020, led by a quick supply restoration than demand recovery. During July-August 2020, most players have resorted to discounts to boost sales and also generated the much-required internal liquidity. Disbursement of COVID-19 bank loans and promoter-led infusions also supported liquidity and the ability of fabric and apparel players to ramp up operations quickly in these segments. Ind-Ra expects apparel prices to remain modest in 2HFY20-21 to push sales. 
     
    Readymade garments exports recovered significantly starting June-July 2020, the ratings agency says, adding, that order book build up in August 2020 was strong, supported by restocking at global retailers and global sector consolidation. "Large Indian players are benefitting from the shift in market share to India from China. Large apparel and readymade garment manufacturers have largely been able to resolve labour mobility and availability concerns," it added.
     
    According to Ind-Ra, demand for home textiles has been only moderately impacted as they are necessary products for day-to-day life. However, it says, US-China trade war has impacted imports from China into the US, thus giving a strong push to exports from India. 
     
    "We expect the demand for home textile exports to sustain in 2HFY21 at healthy levels achieved over August-September 2020. We also expect Indian players to increase their already strong market share in terry towels and bed linens, led by supply chain diversification away from China," the ratings agency concludes.
     
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    Battered Residential Realty Demand to Halve This Fiscal; Price Correction of 5-15% Possible: CRISIL
    The already languishing residential real estate demand is expected to plunge 50%-70% on year in the current fiscal, with the coronavirus (COVID-19) pandemic crushing economic activity and with it, big-ticket spending and it has become survival of the fittest as small to mid-sized developers stare at huge funding gap, says a research note.
     
    In the report, ratings agency CRISIL says, "As a result, the credit profiles of small-to-mid-sized and leveraged developers will be impacted than larger, experienced developers with healthy balance sheets. With demand going down, capital values will remain under pressure across cities. We expect a price correction of 5-15% across ticket sizes."
     
    According to Isha Chaudhary, director at CRISIL Research, lowering capital values and attractive interest rates augurs well for affordability, which has improved by 10%-30% across cities during the past five years- as measured by CRISIL's proprietary index MAHTI1. 
     
     
    "Despite improved affordability, demand translation will be feeble led by income uncertainty arising from pandemic coupled with weak investor sentiment emanating from pressure on capital appreciation or rental yields in the sector over past few years," she says.
     
    While demand for new units will see a sharp decline, the ratings agency says the blow to customer collections will be cushioned by advances against already sold inventory realised in line with construction progress. 
     
    The report says, "The one-time relief for Real Estate Regulatory Authority (RERA)-registered projects would provide players an option to manage outflows through flexibility to delay construction spend. Postponing capex and land banking plans could be another way. However, overall funding requirements are expected to rise as the hit in collections is expected to be far steeper than the decline in outflows due to deferred construction."
     
    That said, the ratings agency sees large diversified players with strong delivery track record are expected to manage better as indicated by an analysis of the top 10 CRISIL-rated developer groups.
     
    Sushmita Majumdar, director at CRISIL Ratings, says, “Larger, established developers have ample financial flexibility, with debt-to-total assets ratio (a measure of leverage) estimated at a five-year low of about 30% as of end-fiscal 2020. Many will also have access to steady income from operational commercial assets. We estimate the increase in funding requirements for these players at only 15-25% higher than pre-pandemic estimates.”
     
     
    The situation, however, is far bleaker for developers on the other side of the spectrum, as per CRISIL’s analysis of more than 100 small developers and single-project special purpose vehicles (SPVs).
     
    It says, "Small-to-mid-sized developers will face a sharp about 200% rise in funding gap this fiscal. But their ability to borrow or raise capital is limited as debt-to-total assets ratio is significantly high at around 75% as of March 2020. Interest cover is also weak, at 1.2-1.5 times versus ~2.0 times for the large developer groups."
     
    Given tight liquidity, the ratings agency sees some of these players vying for tie-ups with larger established names by way of joint ventures, joint development agreements, and development models to benefit from their processes and financial flexibility, or resort to distress sale of assets to raise funds.
     
    "Demand for the sector has been subdued over the past decade, on account of a raft of factors: demonetisation, unaffordability, delay in completions. While income and employment generation remain monitorable, a mild recovery in residential demand might be expected in second half of the current fiscal, in the baseline case," CRISIL concludes.
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    COMMENTS

    shankar_1979

    1 week ago

    Constructed Real estate sector has been in a zombie state, with low rental yields, low appreciation, low earning power of people and high prices. While rate decreases have been predicted before throughout the past decade, it did not happen. Unfortunately the sector is bound to stay like this for even more time. However investors have continued to lose wealth on a nominal basis (after taxes, maintenance costs, and interest payments) for a long time now.

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