On Friday, the Karnataka High Court dismissed the plea filed by e-commerce companies Amazon and Flipkart, challenging the probe ordered by the Competition Commission of India (CCI) against them for violations of Competition Law.
In a significant judgement on Friday, the Karnataka High Court quashed the writ petitions filed by Amazon.com Inc. and Walmart-owned Flipkart against an order by the competition regulator over anti-competitive and unfair trade practices.
On January 13, 2020, the Competition Commission of India had ordered a probe against e-commerce giants Amazon, Flipkart on alleged anti-competitive practices in a case filed by the Delhi Vyapar Mahasangh under Section 3 of the Competition Act.
The Delhi-based association had alleged that both Amazon and Flipkart were indulging in exclusive arrangements with suppliers and, in turn, were providing preferential treatment to some sellers, along with offering deep discounts.
The CCI had noted that there was a prima facie case and had asked the director-general to investigate both the companies. Last year, the Karnataka High Court had granted an interim stay on the CCI order after both companies approached it. The Competition Commission of India had challenged this before the Supreme Court, which had directed the regulator to approach the high court for relief.
In its order on Friday, the Karnataka High Court has said that the CCI can now directly investigate the complaints filed by the Delhi Vyapar Mahasangh (DVM), a group representing small and medium business owners in the national capital, against the alleged unfair trade practices by these e-commerce majors.
Traders body allege that e-commerce companies indulge in unfair trade practises
In October 2019, Delhi Vyapar Mahasangh (DVM) had filed an appeal before CCI alleging anticompetitive vertical agreements between Flipkart and Amazon with their respective preferred sellers giving them an edge over other sellers. It was alleged that most of these preferred sellers are affiliated with or controlled by Flipkart or Amazon, either directly or indirectly.
The traders’ body had also alleged that these platforms are capable of influencing the price being charged by sellers by providing several discounts and inventory to them.
The DVM has also contended that these platforms have gathered data on consumer preferences and allegedly use them to their advantage. It was further alleged that Amazon and Flipkart are involved in providing deep discounts to their users despite incurring losses.
Further, the DVM has cited how these e-commerce companies indulge in ‘Preferential Listing’ of their products by categorising the products sold by its preferred sellers as “Assured Seller” and “Fulfilled”, and allegedly created a bias in favour of preferred sellers to the detriment of other sellers.
“Besides receiving deep discounts, such assured sellers also receive a preferential listing on the website, pushing the results of the non-preferred sellers further down in the search results without any basis whatsoever,” the traders’ body pointed out.
The traders’ body also said that the two e-commerce major have entered several tie-ups and private labels, which get more preference in terms of sales. According to DVM, their private label brands, sold through their platforms, are routed through a few preferential sellers.
It is alleged that having exclusive tie-ups in the relevant market with the smartphone companies provides exclusivity through discounting and preferential listings, which leads to other competitors being excluded and foreclosed from the market.
E-Commerce giants says CCI has no jurisdiction
Both Amazon and Flipkart challenged the earlier orders passed by CCI directing investigations contending that the orders violated on the grounds that the impugned order suffered from non-application of mind. The petitioners claimed that they were not provided with any notice or opportunity of hearing before forming passing the orders.
The petitioners also said that the CCI order was not a reasoned order as the jurisdiction of CCI is barred on account of a pending investigation by the Enforcement Directorate etc.
Rejecting the pleas advanced by Amazon and Flipkart, the High Court dismissed the writ petitions challenging the jurisdiction of CCI and ordered the resumption of investigations into the possible violations of FDI rules by these companies.
“We will review the judgement carefully and decide on the next steps,” said an Amazon spokesperson following the High Court judgement.