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By Aditya Kalra
NEW DELHI (Reuters) - Amazon asked the Indian government on Thursday not to change e-commerce foreign investment rules until investigations into its business practices had been concluded, two sources familiar with the discussions told Reuters.
The commerce ministry met e-commerce players after allegations by retailers, which are a crucial part of Prime Minister Narendra Modi's support base, that Amazon and Walmart's Flipkart create complex structures to bypass federal foreign investment rules and damage small traders.
Both companies deny any wrongdoing and say they are helping small businesses in India.
New Delhi has been considering revising e-commerce foreign investment rules for weeks. The last time they were changed, in 2018, it forced Amazon and Flipkart to rework their business structures and soured trade relations between India and the United States.
Last month a Reuters report, based on internal Amazon documents, revealed that the U.S. firm had for years given preferential treatment to a small group of sellers on its platform, giving them discounted fees and helping one cut special deals with big tech manufacturers. To read the special report, click http://reut.rs/2OCOT2W
Amazon has said it "does not give preferential treatment to any seller on its marketplace," and that it "treats all sellers in a fair, transparent, and non-discriminatory manner".
During Thursday's meeting, an Amazon executive told commerce ministry officials that the Competition Commission of India (CCI) and the Enforcement Directorate were probing the allegations and "it would be premature to make any policy change" until those proceedings have concluded, two sources with direct knowledge of the discussions said.
The antitrust watchdog has said the Reuters story corroborated evidence it had against Amazon, while the federal financial crime-fighting agency has sought information and documents from Amazon.
Amazon, which said during the meeting it complies with all laws, said any policy change which impacts current investments would dent global investor confidence and sentiment, and any disruption caused have a "devastating consequence" on suppliers and small businesses, the sources added.
Flipkart also called for policy stability during the meeting, one of the two sources said.
Amazon told Reuters in a statement it welcomed the government consultation process and the foreign investment policy "needs to be stable and predictable for investor confidence". Flipkart declined to comment.
Meanwhile, the retail arm of Reliance Industries, led by India's richest man Mukesh Ambani, urged the government to clarify the policy, saying complex legal structures had been used by some firms to bypass rules, a third source said.
Reliance declined to comment.
As a domestic player, Reliance is not constrained by rules that prohibit companies like Amazon and Flipkart from owning inventory sold via their local websites.
The rules also place other restrictions on the foreign players, which are locked in a battle with Reliance as it expands its e-commerce operations.
(Reporting by Aditya Kalra in New Delhi; Editing by Euan Rocha and Alexander Smith)