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BENGALURU : Online marketplace Amazon India has proposed to take full control of Cloudtail, the largest and longest-serving seller on its platform, just months after deciding to end the joint venture.

On Wednesday, Amazon said it approached the Competition Commission of India (CCI) for approval to acquire Narayana Murthy-led Catamaran Ventures stake in Prione, which operates Cloudtail. If CCI approves the deal, Amazon will fully own Prione.

“Prione Business Services Pvt. Ltd, the joint venture between Catamaran and Amazon, will be acquired by Amazon subject to requisite regulatory approvals. On 9 August, the partners had announced their decision to not continue the JV beyond the end of its current term of May 2022. Amazon will buy Catamaran’s shareholding in Prione in compliance with applicable laws, including all assets and liabilities," Amazon India and Catamaran said in a joint statement.

Once Amazon takes full ownership, though, Cloudtail won’t be able to continue as a seller on the marketplace under India’s current rules.

India prohibits foreign direct investment (FDI) in inventory-based models for e-commerce and permits firms such as Amazon India and Flipkart to work only as marketplaces for other businesses. Under Press Note 2 issued by the commerce ministry’s department of industrial policy and promotion on 26 December 2018, marketplaces cannot participate in seller activities through any group firms. To abide by the law, in 2019, Catamaran Ventures raised its stake in Cloudtail’s parent to 76% from 51% earlier, with Amazon reducing its stake to 24% from 49% earlier.

Amazon’s move comes at a time India is looking to tighten rules for e-commerce, after complaints from trader associations about alleged anti-competitive practices.

“The businesses of the joint venture shall continue under the leadership of the current management, and on receipt of regulatory approvals, the board of Prione and Cloudtail will take steps to complete the transaction in compliance with applicable laws," the statement said.

“Prione and Cloudtail business will continue till receipt of regulatory approvals," an Amazon India spokesperson said, responding to Mint’s queries.

“By upping their stake in Prione, it is clear that Cloudtail cannot be an eligible seller on Amazon as it becomes a 100% subsidiary. Hence, the signal that Amazon could be sending is they are following the law in letter and spirit. But that doesn’t stop Prione from working with other select sellers (on Amazon’s platform) and providing the necessary know-how they have acquired through operating Cloudtail for a fee...It will now usher in a new business model for marketplaces," said Shinoj Koshy, partner, Luthra and Luthra Law Offices.

“With this, Amazon has greater influence, yet no stake in certain sellers," added Koshy.

While announcing the end of their seven-year partnership in August, both Catamaran and Amazon said Cloudtail India will shut operations in May 2022.

An Amazon spokesperson declined to comment on the future of Cloudtail.

Last week, CCI said Amazon’s 2019 deal with a Future Group company would remain in abeyance.

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