Amazon Seller Services Private Limited has written a letter refuting media reports that claimed the company spent Rs 8,546 crores on legal fees, The Hindu reported. It has addressed the letter to the Minister of Commerce Piyush Goyal.
Media reports earlier claimed that Amazon’s lawyers funneled this amount to bribe Indian government officials.
Investigation into the issue
After the story broke, two unnamed government officials told Hindustan Times that the government is examining the issue. They said:
“The abnormally high expenditure as legal fee certainly raises doubts, especially when the government has received written complaints from various people, including association of the local retailers.”
Amazon had earlier said that it will investigate the bribery allegation but maintained that the legal expense figures being reported were inaccurate.
CAIT claims also untrue
The Confederation of All India Traders had also claimed, on the basis of data from the Ministry of Corporate Affairs, that Amazon spent 20 percent of its overall revenue towards legal expenses during FY19 and FY20. It had also written a letter to the Minister regarding the issue.
In a five-page letter dated September 28th, reviewed by The Hindu, Amazon said that ‘Amazon India Limited’ is not connected with Amazon’s Indian subsidiaries. The reported legal expense figure includes fees paid by this entity which is not an Indian subsidiary of the firm. “Amazon India Limited is neither an Amazon subsidiary nor connected with Amazon in any way”, it said. Not Amazon, but real estate entities own the said company.
Further, the media outlet’s calculation of the expense included substantial non-legal expenses such as customer research, merchant onboarding services, customer service cost, outsourcing, tax consultants, logistic support services, etc. Amazon said:
“In making these claims, the articles cited “public account filings” made by Amazon. We immediately issued a statement clarifying that the quoted amount was inaccurate and appears to stem from a misunderstanding of those same filings, in particular a “legal and professional expense” line item that includes substantial non-legal expenses.”
It’s a sensitive issue for Amazon
The issue is very sensitive for Amazon. The United States Foreign Corrupt Practices Act (FCPA) prohibits public firms and individuals from paying bribes to foreign government officials in lieu of assistance in establishing or retaining the business.
Cognizant Technology Solutions recently settled a similar case with $95 mn, where a class-action suit alleged the company of defrauding shareholders by concealing the fact that it was bribing Indian officials to obtain certain permits. The company further paid $25 million to the SEC to settle an investigation into the issue.
Amazon is also facing a Competition Commission investigation in India.