Karnataka High Court dismisses writ petition of Amazon, Flipkart against CCI probe

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Competition Commission of India (CCI) can go ahead with a probe against Amazon and Flipkart for alleged anti-competitive practices, the Karnataka High Court said on June 11, a judgment that will have a bearing on India’s expanding e-commerce space.

It all started almost 18 months ago 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 biggest e-commerce players, accusing them of anti-competitive practices, predatory pricing and preferential treatment of sellers among others.

The court also dismissed the plea of Flipkart’s senior counsel for a two weeks extension of the interim order.

The order was pronounced by Justice PS Dinesh Kumar.

Amazon and Flipkart will now have the option to either go to a two judge bench in the High Court or the Supreme Court.

In October 2019, DVM had alleged that Amazon and Flipkart were giving preferential treatment to a select set of vendors by having indirect control on their operations, especially the launch of smartphones.

It also raised the issue of exclusive smartphone launches on these platforms in violation of the Indian rules for marketplaces. Marketplaces, read e-commerce players, cannot mandate sellers to sell any product exclusively on their platforms. A marketplace cannot exercise ownership and control over the inventory purported to be sold on its platform, says Press Note 2 which governs the rules for e-commerce companies in India.

DVM had filed the complaints under Sections 3 and 4 of the Competition Act.

The CCI passed an order in January 2020 based on the information submitted by DVM under Section 3, 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.

“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 and therefore without wasting any more time, the CCI should immediately begin its probe,” said BC Bhartia, National President and Praveen Khandelwal, Secretary General of the Confederation of All India Traders (CAIT).

CAIT also said that foreign companies particularly in the e-commerce sector have been taking India as a banana republic where the laws, policies and the rules have no sanctity and they have been provided with impunity to manipulate them according to their wish. “Unfortunately they have been successfully violating the law and the polices bringing much disadvantage to the small traders of the country. Therefore, the dictum ” actions speak louder than the words” needs to be put into practical operations by the Union Government.”

In September 2020, CCI challenged the interim order in the Supreme Court. Justice Nageswara Rao sent the case back to the High Court, saying the case be heard as soon as possible in October 2020.

Since then, the case had been going on in the High Court.

Questioning the discounts offered on marketplaces like Amazon and Flipkart, in one of its arguments, CCI had said that when a big player enters a space, it offers discounts to capture the market. People should be alert once the prices go abnormally low. While the company takes the hit for some time, the larger agenda always is to weed out smaller players.

In previous court sessions, Amazon and Flipkart had categorically denied any wrong doing.

Amazon had said that the allegations that it had preferred sellers were completely incorrect adding that there was no direct relation between Amazon and any of its sellers.

“We will review the judgement carefully and decide on the next steps,” said an Amazon spokesperson following today’s judgement.

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