Amazon and Flipkart to face CCI probe on preferential treatment

| Updated: July 23, 2021 11:38 am

Online majors – Flipkart and Amazon – will have to go through investigations by the Competition Commission of India (CCI), a division bench of the Karnataka High Court ordered. The petition was moved by e-commerce majors against the single judge bench order that held the investigation into business practices of the two companies by the CCI as just.

The bench of Justice Satish Chandra Sharma and Justice Nataraj Rangaswamy observed that if the petitioners are not involved in violation of any provisions of the Act of 2002, they should not feel shy in facing any inquiry.

“In the concerned opinion of this courts, the appeals are devoid of merits and substance and deserves to be dismissed and are according dismissed,” the court said in its order.

Case Background

A trader organization called Delhi Vyapar Mahasangh had alleged that Amazon and Flipkart were giving preferential treatment to a select class of vendors by having indirect control on their business, especially at the time of the launch of smartphones. Traders have also alleged that e-commerce companies were abusing their competitive position. Based on a complaint from traders, the CCI had decided to launch a probe into these allegations.

The investigation by the competition watchdog was challenged by the companies in the Karnataka High Court, which stayed the probe. However, based on CCI’s plea before the Supreme Court, Karnataka High Court was directed to decide on the merits of the case.

It is argued that Amazon and Flipkart agree with various vendors in terms of supply, market price, discount offered and sell these products on their platforms. These agreements do not allow fair play to other retailers in the same business. Amazon had argued that their algorithm is dictated by consumers and preferential listing is based upon the reflection of the consumers.

On the other hand, traders had submitted that Amazon in its writ petition had mentioned that there are agreements that they sign with smartphone manufacturers. This itself showed that there they have an understanding of the sellers and the nature of such agreements needs to be investigated.

Further, it was said that Flipkart themselves relied on the Snapdeal case, where CCI has noted that agreements between the marketplace and sellers are vertical agreements and hence part of the value chain.

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