The Karnataka High Court on Friday dismissed the plea filed by e-commerce companies Amazon and Flipkart, challenging the investigation ordered by the Indian Competition Commission (ICC) against them for competition law violations.
In an important judgment delivered on Friday, the High Court of Karnataka canceled lawsuits filed by Amazon.com Inc. and Walmart-owned Flipkart against a competition regulator order regarding anti-competitive and unfair business practices.
On January 13, 2020, India’s Competition Commission ordered an investigation against e-commerce giant Amazon Flipkart into alleged anti-competitive practices in a case filed by Delhi Vyapar Mahasangh under section 3 of the Law on competition.
The Delhi-based association had alleged that Amazon and Flipkart engage in exclusive deals with vendors and, in turn, offer preferential treatment to certain sellers, while also offering significant discounts.
The ICC had found the existence of a prima facie case and had asked the managing director to investigate the two companies. Last year, the Karnataka High Court granted an interim stay of the ICC order after the two companies approached it. India’s Competition Commission challenged this in the Supreme Court, which ordered the regulator to apply to the High Court for redress.
In its order on Friday, the Karnataka High Court said that the ICC can now directly investigate complaints filed by the Delhi Vyapar Mahasangh (DVM), a group representing owners of small and medium-sized businesses in the nation’s capital, against the alleged unfair trade practices. by these e-commerce majors.
Merchant organization alleges e-commerce companies engage in unfair trading practices
In October 2019, Delhi Vyapar Mahasangh (DVM) had deposited an appeal to CCI alleging anti-competitive vertical agreements between Flipkart and Amazon with their respective preferred sellers giving them an advantage over other sellers. It has been alleged that most of these favorite sellers are affiliated with or controlled by Flipkart or Amazon, directly or indirectly.
The organization of traders had also alleged that these platforms are able to influence the price charged by sellers by offering them several discounts and inventories.
The DVM also claimed that these platforms have collected data on consumer preferences and have used it to their advantage. It was further alleged that Amazon and Flipkart were involved in offering large discounts to their users despite the losses incurred.
In addition, the DVM cited how these e-commerce companies engage in a “preferential listing” of their products by categorizing the products sold by its preferred sellers as “Insured seller“and “Satisfied”, and would have created a bias in favor of privileged sellers to the detriment of other sellers.
“In addition to receiving significant discounts, these insured sellers also receive a preferential listing on the website, pushing the results of non-preferred sellers lower in the search results without any basis,” the traders body pointed out.
The body of traders also said that the two major e-commerce companies have entered into several mergers and private labels, which enjoy greater preference in terms of sales. According to DVM, their private labels, sold through their platforms, go through a few preferred sellers.
It is alleged that having exclusive links in the relevant market with the smartphone companies provides exclusivity through discounts and preferential lists, which leads to the exclusion and exclusion of other competitors from the market.
E-commerce giants say ICC has no jurisdiction
Amazon and Flipkart have both challenged earlier orders issued by CCI directing the investigations, claiming the orders were being violated on the grounds that the challenged order suffered from carelessness. The petitioners said they were not given any notice or hearing opportunity before issuing the orders.
The petitioners also stated that the ICC order was not a reasoned order, as the ICC’s jurisdiction is excluded due to an ongoing investigation by the Enforcement Directorate, etc.
Rejecting the pleas put forward by Amazon and Flipkart, the High Court dismissed the lawsuits challenging the jurisdiction of the ICC and ordered the resumption of investigations into possible violations of the FDI rules by these companies.
“We will carefully review the judgment and decide on the next steps,” an Amazon spokesperson said following the High Court ruling.