International pushback disrupts Amazon’s momentum to expand its empire worldwide

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The e-commerce giant Amazon has bet big on India, even boasting on a company website last year about its ability to deliver to a remote Himalayan village 11,500 feet above sea level. The company recently debuted a version of its e-commerce site in Hindi, a move Amazon’s top India executive said was part of its effort to attract “the next 100 million customers,” in what analysts described as the company’s most important market abroad.

Yet whether India continues to welcome Amazon is an open question. The country’s policymakers recently raised alarm bells about what they describe as a “handful of companies” that “dominate the digital economy” and earlier this year instituted a rule change that forced Amazon to scale back aspects of its business in India.

The country of more than 1.3 billion people is not the only place where Amazon is experiencing challenges.

Three sets of regulators in Europe over the past year have opened investigations into whether Amazon is a threat to open competition, underscoring how foreign markets are demonstrating the type of concern about the company’s power that is only beginning to draw attention in the United States.

If policymakers in these countries end up moving to limit Amazon – in effect protecting homegrown businesses – that would present a barrier to continuing the company’s record of unbridled growth. Amazon has rapidly grown its sales over the past two decades, but some analysts are now questioning whether the U.S. market is becoming saturated, putting an increased burden on foreign sales.

The challenges abroad could also be a hint of what’s to come in the United States, where a small but growing number of political leaders are taking aim at the company.

“Just because they were successful in the U.S. doesn’t mean they’ll be successful internationally,” said Brian Yarbrough, an analyst at Edward Jones. “The international side of things definitely creates speed bumps. . . . As it becomes more and more difficult, does the company have to pivot or decide to exit some of these markets?”

Amazon, for its part, said in a statement, “People like low prices, big selection and fast delivery, pretty much everywhere around the world.” While there may be differences in how the company markets certain programs or delivery options, “we don’t change our approach as we move around the world, and we face stiff competition everywhere we operate.”

(Amazon founder and chief executive Jeff Bezos owns The Washington Post.)

Jay Carney, Amazon’s senior vice president of global corporate affairs, told The Post that while Amazon is a tech company, “a lot of the issues that are front and center in Europe, as well as here, that raise concerns are simply not ones that are prominent for us because of our business model.” Still, he said part of his job involves working with policymakers around the world to “build and invest and hire and meet the needs of governments.”

“We’re not morally superior,” Carney said. “We just have a different business model.”

Amazon’s international business is important to its overall model, accounting for 28 percent of its revenue in 2018 – although it has long been a money-losing unit. Adding to the importance of succeeding in India and Europe, the top market for many American companies, China, has long been difficult for Amazon. It purchased a subsidiary online retailer there in 2004 and has worked for more than a decade to build its Chinese e-commerce business. But the country has become almost entirely cut off to foreign online retailers, given the dominance of platforms like Alibaba and JD.com, which together account for almost 75 percent of all retail e-commerce sales in China in 2018, according to eMarketer.

Amazon officially threw in the towel in the domestic Chinese market earlier this year, announcing it would close its marketplace in July.

Amazon’s investments will only become more important should American retail sales level out, Yarbrough said. That means heavy investment in countries like India, with the hope that profits are not far behind.

“They’re sinking all this money into the India market,” Yarbrough said, “and they’re saying they’re going to replicate what they did in the U.S. after years and years of investment.”

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The pushback from India and Europe has important differences, but there is a common thread: As Amazon points its ambition abroad, foreign governments are pushing back in ways the U.S. government has not.

The biggest broadside came in September from Margrethe Vestager – the European Union’s top competition enforcer, who has taken a tough stand against big technology companies. That month, she launched a preliminary antitrust investigation into Amazon, probing whether Amazon’s “dual role” as a seller of its products and a marketplace for others gives the company too much power. Vestager said her concern is that Amazon could use data from its rivals – namely merchants who sell on its platform – to edge out the competition.

The probe followed up on concerns raised by retailers who say Amazon’s model gives it an unfair advantage.

“The question here is about the data,” Vestager said in September. “If you as Amazon get the data from the smaller merchants that you host – which of course can be completely legitimate because you can improve your service to these smaller merchants – do you then also use this data to do your own calculations on what is the new big thing? What is it that people want?”

The preliminary probe, which she said in March was in “quite advanced” stages, includes sending questionnaires to online sellers and could be the first step toward a more formal investigation.

Amazon declined to comment on the EU’s probe into antitrust concerns.

Vestager has made her mark going after Big Tech. Consider Google: In March, the EU fined Google roughly $1.7 billion for advertising practices the European Commission said violated antitrust laws. Last year, Vestager handed the tech giant a $5 billion antitrust fine and required the company to change how it places search and web browser functions into Android phones. And in 2017, Vestager levied a $2.7 billion fine on Google for how it steered users toward its comparison shopping site.

“The European Union has always been preoccupied with very large companies,” said Scheherazade Rehman, a professor of international business at George Washington University. “Whether it’s Microsoft or Facebook or Amazon . . . their focus is antitrust and, more recently, privacy.”

In mid-April, Italy’s competition authority said it, too, would launch a preliminary probe into how Amazon used its e-commerce and logistics services. Regulators said they would look into whether Amazon boosted third-party vendors that used its logistics service over other sellers that did not.

Germany has also announced an antitrust investigation into Amazon.

In India, the pushback against Amazon is part of a broader response to the rise of foreign players in the e-commerce industry. The country’s Hindu nationalist ruling party, which is seeking reelection, has long drawn strength from the owners of the country’s millions of mom-and-pop stores. Those shopkeepers have complained loudly about the growing influence of companies like Amazon.

Experts say India has become Amazon’s most important emerging market. Amazon said it has committed more than $5 billion to India, including building more than 50 warehouses to make deliveries all over the country. According to British bank Barclays, Amazon is the country’s No. 1 internet marketplace in terms of total value of merchandise sold.

Big companies all have the same goals, said Praveen Khandelwal, who heads the Confederation of All India Traders, an association that says it represents 70 million small retailers. “Number one, to control, dominate and monopolize the market, and second, to crush the competition,” he said.

“We are not against e-commerce,” he continued, but companies like Amazon indulge in “malpractices which include predatory pricing, deep discounting and loss funding . . . to the utter disadvantage of the retail sector of India.”

Amazon says the prices for products sold on its Indian marketplace are determined by the sellers. The company said it invests in services, like Fulfilled by Amazon and Easyship, which help sellers lower their costs as they scale up to sell nationally.

At the end of December, India’s Commerce Ministry issued new rules that targeted how Amazon and Walmart did business in the country. Under existing Indian regulations, Amazon could not control its own inventory, as it does in the United States. But it worked with two key sellers – Cloudtail and Appario – in which it indirectly held a stake. The rule change aimed to close that loophole.

“It was a bit of an ambush,” said one person involved in the industry who spoke on the condition of anonymity because they were not authorized to discuss the matter.

Amazon and Walmart urged the Indian government to delay the implementation of the rules, but it refused. As a result, when the rules came into force in February, all the products sold by Cloudtail and Appario disappeared from the Amazon site. But within two weeks, they were back – after Amazon had reduced its stake in the parent companies of both firms.

“I would expect them to continue fighting and not to give up because the potential upside is almost limitless,” said Michael Auslin, an expert on U.S. policy in Asia and a fellow at the Hoover Institution.

In February, the Indian government released a new draft of a national e-commerce policy that aims to provide a “level playing field” for all companies. It seeks to empower domestic entrepreneurs and warns of “enterprises with deep pockets” that “threaten the existence of small businesses” and discourage competition. Among the changes it proposes are restrictions on how data from Indian consumers can be used.

The government is soliciting feedback on the policy, but a final version is unlikely to emerge until after India’s national elections conclude in late May.

“Definitely, the idea is to promote domestic market players, be they big or small,” said Atul Pandey, a partner at Khaitan & Co., a major Indian law firm, who focuses on cross-border transactions.

But others say India’s objective is more far-reaching: to create a “China-like situation” where the barriers to foreign players “progressively become higher,” said Nikhil Pahwa, a technology expert who has written extensively on Indian government policy.

The government sees “data as a national asset and control of the Internet economy as a nationalistic objective,” he said.

Representatives of India’s Commerce Ministry declined to comment.

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So far, American antitrust law has not posed a threat to Amazon’s business model. The company’s portfolio spans e-commerce, cloud computing, advertising and more.

But more policymakers on both sides of the aisle have been viewing Amazon with a skeptical eye.

In 2017, a lengthy essay published in the Yale Law Journal by then-law student Lina Khan made a case for why American antitrust law is no longer fit to take on Amazon and tech giants like it. Khan’s argument has proved influential among a number of U.S. policymakers, and she has subsequently advised the Federal Trade Commission.

The 2020 elections could further debates around antitrust law and its ability to rein in Amazon. Those calls have largely come from Sen. Elizabeth Warren, D-Mass., who said she would move to break up Amazon, Facebook and Google if she became president. The companies have “too much power over our economy, our society and our democracy,” she said.

Talking specifically about Amazon, Warren said the company should be able to operate its own platform – but not also own the auxiliary businesses that sell on it.

“It’s like in baseball,” Warren said in an interview with The Washington Post last month. “You can be the umpire; that’s like the platform. Or you can own the team; that’s one of the businesses. But you don’t get to be the umpire and own the team in the league.”