No Stay on the probe by CCI on Amazon and Flipkart: Supreme Court

| Updated: August 9, 2021 12:58 pm

The Supreme Court of India on Monday refused to stop the probe by the Competition Commission of India (CCI) on alleged violation of foreign direct investment (FDI) rules in India. The online majors had challenged the July 23 order of the Karnataka High Court, in which the apex court has refused to stay the matter.

A bench comprising Chief Justice of India NV Ramana, Justices Vineet Saran, and Surya Kant refused to interfere with the orders of the Karnataka High Court order that ruled that if retail majors are not involved in violation of any provisions of the Act of 2002, they should not feel shy in facing any inquiry.

“We see no reason to interfere in order. Seeing that time granted is expiring on 9 August, we extend it by 4 weeks,” a bench comprising Chief Justice of India NV Ramana, Justices Vineet Saran, and Surya Kant said while refusing the request of stopping the probe. However, it allowed time to Amazon and Flipkart to file the reply before the CCI.

Meanwhile, the largest trader organisation, the Confederation of All India Traders (CAIT) demanded a probe to begin immediately. “We demand the commerce minister to direct the CCI to begin the probe immediately. There is no scope for Amazon and Flipkart to avoid the investigation now,” Pravin Khanelwal, general secretary, CAIT said.

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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