Splainer

Tuesday, June 22 2021


Dive In

Whatever issues we have with the Chinese, we speak to them behind closed doors. China has been one of the greatest friends to us in our most difficult times. When we were really struggling, our economy was struggling, China came to our rescue. So we respect the way they are.

That’s Pakistan Prime Minister Imran Khan defending his damning silence on the repression of Uighur Muslims in China—while raising the human rights situation in Kashmir. When pressed on his silence by Axios in an interview, he said: “I concentrate on what is happening on my border, in my country.” FYI: the province of Xinjiang—where the Uighurs have been rounded up into detention camps—is located exactly on Pakistan’s border. Watch the clip here.

Big Story

Splainer AMA with Shashi Tharoor

We are ending our series of Splainer AMAs for our birthday month with a bang! No introduction we offer to Mr Tharoor could possibly do true justice to his career and achievements. Suffice to say, we are delighted to have him as our guest—and that you will have the opportunity to speak directly with him. Time/date: Saturday, June 26, 2021. Sign up here to reserve your place. Please note this event is open to all subscribers!


PS: ICYMI, our AMA with Sandip Roy was an illuminating, lively and wide-ranging discussion on queer identity, culture and politics—and their intersection with caste, race and gender. We also learned a lot about ‘passport princesses’ and ‘curry queens’ lol! Be sure to check it out here.

 

New rules to target Amazon & Flipkart

TLDR: For the past few years, the government has been tightening the screws on foreign-owned e-commerce giants—to favour Indian traders and merchants and local rivals like Reliance. The latest salvo will come as a big blow to not just these platforms, but also its biggest sellers and you, dear customer.

 

First, some extended background

The government’s big plan: The government’s primary aim is to benefit Indian entrepreneursbe they small and medium-sized merchants or big boys like Reliance. And it has been steadily working toward limiting the advantages enjoyed by big global ecommerce platforms, be it Amazon or Walmart-owned Flipkart. And it has done so by taking aim at practices that are at the heart of their business model.

 

The ecommerce MO: 

  • At first blush, Amazon and Flipkart are just vast marketplaceswhere a wide range of sellers jostle to sell you their wares. 
  • But in reality, some sellers are more special than othersand are called ‘Special Merchants’. 
  • Both companies have partnerships with certain sellers who are covertly given preferential treatmentso they can outsell their rivals on the platform by giving you a cheaper price. 
  • These platforms also use their financial clout to bully/coax all sellers to offer bigger and bigger discountsso that offline merchants simply can’t compete. 
  • All of which create a rigged marketplace.

 

The Cloudtail example: Since foreign ecommerce companies are forbidden from selling directly to customers, Amazon set up a joint venture with Narayana Murthy’s Catamaran Capital to set up a company called Cloudtail in 2014. It owned 49% and Cloudtail operated essentially like an Amazon proxywith big benefits: 

  • The wholesale companies owned by Amazon would sell products at vast discounts to Cloudtailwhich in turn would undersell everyone else on Amazon.in. 
  • Or Amazon would broker Cloudtail’s exclusive relationships with tech companies like Apple, One Plus etc. so it became the only company allowed to sell their productsand only on Amazon. 

 

Point to note: Internal documents show that one of Amazon’s goals was “to ensure Cloudtail accounted for 40% of Amazon.in sales, ‘and build this into a $1+B business’ in 2015.” 

 

The first government salvo: In 2019, the government notified a new set of rules that took aim at these practices. These stipulated that:

  • Amazon, Flipkart et al cannot sell products of any company in which they own any kind of significant stake. 
  • They can no longer ink exclusive ‘sold only on…’ deals with companies.
  • No seller on their platform can source more than 25% of their inventory from wholesale units owned by either company.

 

The great workaround: Amazon promptly cut back its stake in Cloudtail, reducing it to 24%so it would not be considered as part of the Amazon group. Others like Flipkart created so-called “middle layer” companiesin which it again owned less than a 25% stakebetween its wholesale arm and sellers. In general, loopholes were found and business resumed as usual.

 

The big probe: But since governments and business rivals are not exactly stupid, the problem didn’t go away. Instead, in January 2020, India’s antitrust watchdog, the Competition Commission of India, opened a probe into Amazon and Flipkart, citing four anti-competitive practices: exclusive launch of mobile phones on their platforms, promoting preferred sellers on their websites, deep discounting, and prioritizing some seller listings over others.


Point to note: Both Amazon and Flipkart are currently in court, fiercely fighting to block the probe.

 

The government’s latest move

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In today’s edition

Headlines That Matter 

  • The first trans athlete at Olympics
  • Tamil Nadu’s kickass economic council
  • Tasmanian devils: A wildlife tragedy
  • The cause of a ‘broken heart’
  • The two Jeff Bezos petitions

 

A list of intriguing things

  • Post Malone got himself a pair of bedazzled fangs
  • Say hello to the blanket octopus which sports a giant rainbow cape
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