Amazon to acquire Prione Business Services in compliance with applicable laws

Prione Business Services, the joint venture between Narayan Murthy-led Catamaran and Amazon, will be acquired by Amazon. Prione's wholly owned subsidiary Cloudtail India is one of Amazon's largest sellers in the country.

"Amazon will acquire Catamaran's shareholding in Prione in compliance with applicable laws including all assets and liabilities," the two companies said in a joint statement on December 22.

"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 added.

So far the two companies jointly own Prione Business Services, whose wholly-owned subsidiary Cloudtail India has repeatedly come under the scanner for alleged violation of Foreign Direct Investment (FDI) norms.

On August 9 this year Amazon and Catamaran announced their decision to not continue the joint venture beyond the end of its current term of May 2022. This decision came following the Supreme Court's decision which allowed the Competition Commission of India (CCI) to conduct an investigation into the alleged anti-competitive practices of Amazon.

While for now Cloudtail will continue as a seller on Amazon, it wasn't immediately clear if it could continue as post this acquisition since the e-commerce rules bars marketplaces from having any ownership in the firms run by their sellers.

In India, e-tailers are known to be having a set of preferred vendors who get a majority of the business generated by these companies.

In 2018, the government had come up with Press Note 2, revising the then-existing Press Note 3. It asked the marketplaces to ensure that they will not sell the products of their group companies on their platforms.

Following the clarification, Amazon, which is also alleged to be getting a majority of its business from Cloudtail did a rejig in its structure in India.

In February 2019, Catamaran Ventures raised its stake in Prione Business Services. The move reduced Amazon Asia's stake in Cloudtail to 24 percent from the earlier 49 percent, with Catamaran Ventures' stake rising to 76 percent from 51 percent earlier.

Following this, Cloudtail ceased to be an Amazon group company, making it compliant with the rules on the papers but yet not serving the purpose with which the norms were straightened.

However, even as the issue got ironed out on papers, the company kept facing constant criticism from offline traders. Now this acquisition makes the waters even murkier with no clarity of how will the company manage to run Cloudtail by presumably having it under its umbrella.