Flipkart, Amazon knock on Supreme Court's doors against unfair trade probe

Flipkart, Amazon knock on Supreme Court's doors against unfair trade probe

The e-commerce giants have appealed against the Karnataka High Court order allowing the Competition Commission of India to probe their alleged unfair trade practices

E-commerce giants Flipkart and Amazon have filed similar appeals with the Supreme Court of India against the Karnataka High Court order that allowed a government agency to probe their alleged unfair and restrictive trade practices.

While the homegrown Flipkart, which is now under Walmart's umbrella, filed its appeal on 27 July, Amazon followed with its appeal the next day.

The two companies that dominate India's e-commerce market and compete with each other have been vehemently opposing a probe into their business by the Director-General of the Competition Commission of India (CCI). The protracted legal tussle was settled last week in favour of the CCI with a division bench of the Karnataka High Court, comprising Justices Satish Chandra Sharma and Natraj Rangaswamy, dismissing a batch of appeals moved by the e-commerce firms on 23 July against an 11 June order of a single-judge bench of the High Court.

The single-judge bench ruling had come over a year-and-a-half after giving the two companies an interim stay on the probe by the anti-trust body.

"Amazon and Flipkart's appeals are devoid of merit and substance and deserve to be dismissed," the Karnataka High Court had said in its judgement.

"The applicants should not feel shy in facing an inquiry by the CCI if they are not in violation of the Competition Act," the bench added.

In its appeal before India's Top Court that runs into 700 pages, Flipkart has said that the details sought reinforced its fear of the invasive nature of the investigation and has prayed for both the information sought and the overall investigation to be put on hold.

"The information sought...is sensitive in nature… It is evident that the director-general is determined to take precipitative action," Flipkart has said in the court document.

Flipkart has pointed out certain lacunae in the entire process saying that there is no finding in the CCI order, the High Court's order and the order passed by the single-judge that prima facie there appears to be a violation of Section 3(4) of the Act.

Flipkart has submitted that Section 26 (1) of the Act requires CCI to form an opinion that there is a prima facie violation of the Act. It has pointed out that the Supreme Court has itself stated in a catena of cases that the formation of a prima facie opinion of a violation of the Act is a threshold requirement under Section 26 (1) of the Act.

Flipkart has argued that in the present case, there is no prima facie finding of a violation of any provisions of the Act.

It has also submitted that in passing the impugned order, the High Court had failed to appreciate that the main issue before it was whether CCI had complied with the threshold requirements prescribed by the Act prior to passing an order under Section 26 (1) of the Act. This includes the existence of an agreement that allegedly violates the provisions of Section 3 of the Act. The existence of prima facie finding of a violation of the provisions of the Act. A prima facie finding of appreciable adverse effects on competition (AAEC) in the relevant market, in a case under Section 3(4) of the Act.

Flipkart has argued that none of these conditions have been complied with in the present case while seeking immediate stay and dismissal of the probe.

Amazon has also taken a similar stand before the Apex Court, saying the watchdog had sought a "wealth of sensitive information within a deadline as short as 15 days."

CCI had asked both firms 32 pointed questions. The deadline to submit their replies expires today. It is highly unlikely that the two firms will comply with the antitrust regulator's deadline given their appeals to the Supreme Court since one of their main demands is to put the probe on hold.

The Competition Commission of India had on 13 January 2020 ordered a probe against Amazon and Flipkart on alleged anti-competitive practices in a case filed by the Delhi Vyapar Mahasangh under Section 3 of the Competition Act that deals with anti-competitive agreements. The Delhi-based traders association had alleged that both Amazon and Flipkart were indulging in exclusive arrangements with smartphone makers, preferential treatment to some sellers and indulging in deep discounting.

Delhi Vyapar Mahasangh in its complaint had alleged that two e-commerce platforms were giving preference to their choicest sellers, thereby killing competition by denying a level playing field, which violated the competition law.

The CCI had observed that there was a prima facie case against both Flipkart and Amazon and had asked the director-general to investigate both the companies.

The Competition Commission of India had defended before the High Court its move to order a probe against the two e-commerce giants over anti-trust behaviour, which includes allegations of exclusive agreements with smartphone makers, stating that such agreements are often tacit.

Both Flipkart and Amazon, however, denied any wrongdoing before the High Court. The two e-commerce giants are facing prospects of tougher e-commerce regulations from Indian authorities over allegations that they circumvent Indian law by creating complex business structures.