The Supreme court of India has given a go ahead to the Competition Commission of India (CCI) to launch a probe into the e-retail practices of Amazon and Flipkart and investigate alleged violations of the Competition Law.
Both companies had appealed against a probe by CCI based on complaints by traders’ organisations. Some of the major allegations against the companies under the Section 26 (1) of Competition Act 2002 are on grounds of providing deep discounts, preferential listing, exclusive tie-ups and abuse of market power.
Two traders organisations, Delhi Vyapar Mahasangh (DVM) and the Confederation of All India Traders (CAIT) have been up against Amazon and Flipkart on grounds of bypassing India’s foreign trade laws.
The apex court’s order allowing the probe to go ahead has come as relief to the traders. “We have been upholding the need for protection of interests of the country’s traders. The investigation will stand to reveal the violations of e-commerce norms. Both were supposed to provide tech-driven market places, but have ultimately introduced predatory pricing models,” Secretary General of the Confederation of All India Traders (CAIT) Praveen Khandelwal told Outlook Business.
A three-judge bench headed by Chief Justice N V Ramana said that challenging the enquiry is like “wanting a notice before the registration of an FIR under the criminal law” and asked the e-commerce giants to submit themselves to the probe by the CCI.
Apart from the CCI probe, Enforcement Directorate (ED) has been investigating both Amazon and Flipkart for alleged violations of foreign investment laws and has recently threatened Flipkart with a $1.35 billion fine.
CAIT has also appealed to commerce and industry minister, Piyush Goyal and finance minister Nirmala Sitharaman for similar action by ED against Amazon.
“Amazon should be given a similar notice like Flipkart as the premise of the inquiry is similar. Additionally, we have made an appeal with the Ministry of Commerce to highlight the e-commerce regulations of the land and reveal all the vital violations by the two companies,” Khandelwal added.
The two companies were not available for their comments on the day’s development. The Supreme court has now given the companies, four weeks to respond.
Earlier, the Karnataka High Court on July 23 turned down an Amazon-Flipkart plea against the CCI probe which was ordered on the basis of a complaint by Delhi Vyapar Mahasangh.
“The Supreme court order has come at the right time as the shopping season is about to start,” Khandelwal added. (with PTI inputs)
HIGHLIGHTS: Where have Flipkart and Amazon gone wrong?
The Competition Commission of India (CCI) ordered investigation into alleged contraventions of the Competion Act (2002) by Amazon Seller Services and Flipkart Internet Services on January 13, 2020 for violations of Section 26 (1) of the Act on following grounds:
Deep discounting: Flipkart and Amazon allegedly provide deep discounts to some preferred sellers as opposed to non-preferred sellers; putting the preferred sellers in an automatic position of advantage.
Preferential Listing: Amazon allegedly provides the tag ‘Assured Seller’ to select retailers. Lends the word ‘fulfilled’ to products sold by preferred sellers that creates further bias.
Exclusive Tie-ups: By holding exclusive tie-ups with some manufacturers, which pushes sales of select companies which also stand to benefit from the discount and preferential listing process.
Market power: Amazon and Flipkart are able to subsidise products because of heavy funding by their investors which puts other retails at automatic disadvantage.