Amazon and Flipkart had approached the Karnataka High Court to quash the order by the CCI on the grounds that there were no agreements between the platforms and sellers on record that were shown to likely have a negative impact on competition.
The Supreme Court has ruled India’s competition regulator will proceed with antitrust investigations into Amazon and Walmart-owned Flipkart, dismissing petitions by both e-commerce majors that a probe into the companies be quashed.
The Competition Commission of India (CCI) had in 2020 ordered an investigation into allegations that Amazon and Flipkart had exclusive agreements with smartphone brands for the sale of certain devices on their platforms and the alleged links that these platforms had with sellers who were said to be getting preferential treatment.
Why has the CCI ordered an investigation into Amazon and Flipkart?
The CCI ordered an investigation based on allegations by trade body Delhi Vyapar Mahasangh that Amazon and Flipkart had entered into exclusive sales agreements with smartphone brands to sell certain smartphones through a small number of preferred sellers. The Delhi Vyapar Mahasangh also alleged that Amazon and Flipkart had given preferential treatment to certain sellers by giving them higher search rankings and offering to incur part of the discount that such sellers would offer during key sales periods such as Flipkart’s Big Billion Days and Amazon’s Prime Day.
The CCI noted in its order that exclusive arrangements between the smartphone brand and online platforms leading to a few sellers selling certain smartphones exclusively on a single platform, coupled with alleged linkages between the platforms and such sellers, merited an investigation.
Incidentally, Amazon India announced Monday that it will be ending its participation in a joint venture Prione Business Services, which owns one such preferred seller – Cloudtail India Pvt Ltd — that has benefitted from preferential treatment by Amazon, according to allegations made by the Delhi Vyapar Mahasangh. The Amazon joint venture with Infosys co-founder Narayana Murthy’s private investment firm Catamaran Venture will cease operations in mid-2022.
On what grounds did Flipkart and Amazon seek to quash the investigation?
Amazon and Flipkart had approached the Karnataka High Court to quash the order by the CCI on the grounds that there were no agreements between the platforms and sellers on record that were shown to likely have a negative impact on competition. The platforms also argued that the commission had not formed a prima facie opinion on the potential impact on competition while passing orders. The platforms had also argued that it was the choice of the manufacturer if they wanted to sell a smartphone exclusively on one platform.
Why did the High Court and Supreme Court reject appeals by Amazon and Flipkart?
The high court concluded that orders by the CCI initiating an investigation were administrative directions and that the CCI was not bound to enter an adjudicatory process or form an opinion before ordering an investigation.
What next?
The Director General of the CCI will complete its investigation into allegations against Amazon and Flipkart and submit its findings to the CCI which will pass final orders on the case.
CCI chairperson Ashok Kumar Gupta has recently said in an interview with The Indian Express that “opacity in platform rankings” had become a cause for competition concern and that the increasing dependence of sellers on online platforms meant that certain platforms were becoming essential facilities and had to treat sellers in an unbiased manner. “Prima facie we have also seen that the ecosystem of exclusive agreements, deep discounting, and preferred sellers put together by online platforms commanding market power, are also raising competition concerns,“, Gupta had told The Indian Express.
