In a blow to US-based Amazon and Walmart-owned Flipkart, a division bench of the Karnataka High Court on July 23 dismissed their petition challenging a probe ordered by the Competition Commission of India (CII) against the two companies for alleged anti-competitive practices.
The petition by the two companies was “devoid of merits and substance”, Justice Satish Chandra Sharma and Justice Nataraj Rangaswamy said, a decision that will have a bearing on the larger e-commerce ecosystem of India.
“Not finding any reason to interfere in the order of the tribunal and therefore the petition is dismissed,” said the judges.
Reacting to the order, Amazon said it will decide the next step, if any, after going through the order. “We respect the judgment passed by the honourable high court and we will review the judgment in detail to determine any next steps,” an Amazon spokesperson said.
Flipkart said its compliance and governance process was robust and it would continue to comply with Indian laws. “We are awaiting to receive a copy of the order of the division bench of the Karnataka High Court and will review as soon as we get it. As highlighted earlier, we have a very robust compliance and governance process and remain in full compliance with Indian laws. We will do everything to be always compliant,” Flipkart Group spokesperson said.
This is the second time that the high court has gone against India’s biggest e-commerce players. The two had earlier challenged a single-judge bench order allowing the antitrust body to continue its investigation against the two marketplaces under Section 3 of the Competition Act that deals with anti-competitive agreements.
The issue dates back to October 2019 when the Delhi Vyapar Mahasangh (DVM), a group representing small and medium business owners in the national capital, submitted a plea with CCI against the country’s two companies, accusing them of anti-competitive practices, predatory pricing and preferential treatment of sellers among others.
DVM filed the complaints under Sections 3 and 4 of the Competition Act. The CCI in January 2020 directing the director-general to conduct a probe.
This order was challenged by Amazon through a writ petition in the Karnataka High Court in February 2020. The high court put the CCI’s investigation on hold the same month.
After months of hearing, Justice PS Dinesh Kumar dismissed the writ petition on June 11, 2021.
The latest high court order comes within days of the e-commerce industry shared its response on the proposed draft Consumer Protection Rules, saying that many clauses in it are likely to have a detrimental impact on consumers.
While the two companies have been opposing an investigation denying any wrongdoing, recently Commerce and Industry Minister Piyush Goyal also insisted that instead of forum shopping, the companies should let the CCI investigate if they were doing honest business, adding that the reluctance showed they weren’t doing it right.
“It fully vindicates the stand of CAIT that Amazon and Flipkart business model is entirely based on violating the FDI policy, rules and other laws, mischievous business practices, therefore, without wasting any more time, the CCI should immediately begin its probe,” said B.C.Bhartia, National President and Praveen Khandelwal, Secretary General of the Confederation of All India Traders (CAIT).