Amazon has asked India’s antitrust authority for approval to buy Catamaran’s stake in Cloudtail’s parent company, Prione

Amazon has asked India’s antitrust authority for approval to buy Catamaran Ventures’ stake in Prione, which operates one of the largest sellers on the e-commerce platform, months after both companies said they would not extend their joint venture beyond May next year .

The announcement comes as a surprise because Catamaran owns 76% of Prione. Amazon previously held a 49% stake in the company, but diluted it to 24% to comply with local laws that prohibit e-commerce companies from owning direct or indirect ownership in companies selling on their marketplaces.

In a joint statement on Wednesday, the two companies said they were complying with applicable regulations “including all assets and liabilities” to complete the transaction and had sought regulatory approval. Amazon has approached India’s Competition Commission seeking approval, a person familiar with the matter said.

Catamaran and billionaire NR Narayan Murthy’s Amazon launched a joint venture in the country in 2014. In 2019, the joint venture restructured its ownership following regulatory changes in India. In August this year, they both announced that they were ending their relationship.

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The statement came after Reuters news agency reported, citing Amazon documents, that the US e-commerce company had for years given preferential treatment to a small group of sellers, including Cloudtail, and used them to evade Indian law. The Competition Commission of India separately ordered an investigation last year into Amazon and Flipkart for allegedly promoting targeted sellers (those in which they have a stake) on their e-commerce platforms and employing anti-competitive business practices. Both companies tried unsuccessfully to discontinue the investigation.

“The operations of the joint venture will continue under the leadership of the current board of directors, and upon receipt of regulatory approvals, the board of directors of Prione and Cloudtail will take steps to complete the transaction in accordance with applicable regulations,” Amazon and Catamaran said in a joint statement today.

Cloudtail is one of the largest sellers on Amazon in India. The two companies said earlier this year that they had enabled more than 300,000 merchants and entrepreneurs to go online and provided digital payment capabilities to 4 million merchants.

Longstanding regulations in India restrict Amazon and other e-commerce companies from holding inventory or selling products directly to consumers. To get around this problem, companies have operated through a maze of joint ventures with local companies that act as inventory holding companies.

India moved to fix the loophole in late 2018, which was widely seen at the time as the biggest blow to a US company in the country. Flipkart, owned by Amazon and Walmart, has tried to withdraw hundreds of thousands of products from its stores and has invested in related companies in a much more indirect way.

In June this year, India proposed even stricter e-commerce regulations that, among other things, prohibit Amazon, Flipkart and other e-commerce players from operating their own/private brands. The new proposal asks e-commerce companies to ensure that none of their affiliates or affiliates are listed on their platforms as sellers selling directly to customers. (New Delhi has not yet complied with the new rules.)

Amazon has stakes in several other third-party sellers, including Appario Retail, which is its joint venture with Patni Group.