CCI dismisses antitrust complaints against Amazon; states Amazon is not dominant in the online fashion

The competition regulator – Competition Commission of India (CCI), has dismissed allegations of abuse of dominance against Amazon in the online fashion retail space, finding that the company is not dominant in the relevant market.

Lifestyle Equities – a Netherlands-based company – proprietor of the brand Beverly Hills Polo Club had alleged that Amazon had leveraged its dominance in favour of its own labels and preferred sellers by giving them higher search ranking and positive customer reviews to the disadvantage of other sellers.

Lifestyle Equities (The Informant) stated that there are instances of unfair and anti-competitive practices by Amazon Seller Services Private Limited (OP-1) and it's affiliate entities which have caused an exclusionary effect on the Informants' overall online business operations in India, by adversely impacting the visibility of the Informants' fashion products sold under the Beverly Hills Polo Club Brand and its online retail sales, leading to a debilitating effect on competition. Further, the Informants also alleged abuse of dominance, leading to foreclosure of competition by hindering entry into the market

"Looking at the present market construct, it does not appear that any one platform is occupying a dominant position in the relevant market," the CCI said in its order.

Lifestyle Equities had also alleged that Amazon had caused reputational damage to the former's Beverly Hills Polo Club (BHPC) brand by selling counterfeit/unlicensed products of the brand at a lower price compared to genuine products. It also alleged that Amazon sold inferior counterfeit/unlicensed/unauthorised products of the Informants, thereby causing immense reputational harm. According to the Dutch company, sale of counterfeit/unlicensed/unauthorised products caused an appreciable reduction of its brand appeal which directly benefited its competitors.

Lifestyle Equities also alleged that through its anti-competitive agreements, Amazon has created an exclusionary effect for the other non-preferred sellers and has concentrated and amalgamated the sellers with which it has, exclusive tie-in arrangements that limited the number of suppliers and distorted competition based on preferential treatments. It also alleged that Amazon gathered data on consumer preferences to its own advantage.

The CCI relied on Red Seer Report dated June 2019, according to which the online fashion segment consists of many players which includes large horizontals like Amazon and Flipkart and verticals like Myntra, Ajio, Koovs etc. The CCI said that as per the Report, the fashion marketplaces'/verticals' collective share is estimated to be around 50% and that of the large horizontal/multiproduct marketplaces such as Amazon and Flipkart to be around 35%.

The CCI bench headed by Chairperson Ashok Kumar Gupta noted that there are multiple players operating in the relevant market for services provided by online platforms for selling fashion merchandise in India.

The CCI said, "Based on the above analysis and the available information at disposal, OP-1 does not seem to be a dominant entity in the relevant market. In the absence of dominance, the question of abuse of dominant position does not arise."

It added, "Besides the horizontal, multi-product platforms such as Amazon and Flipkart, there are a number of vertical, fashion-only platforms which provide significant avenues for fashion brands and retailers to place their offerings before online consumers."

The CCI concluded saying that, "Even otherwise, given the market dynamics, it seems unlikely that the alleged conduct would have the alleged appreciable adverse effect on competition, to conclude a prima facie case of contravention."

Taking up the issue of counterfeit products, the CCI noted that while the online sale of counterfeit goods was a legitimate concern for brands, it needed to be taken up with other regulatory authorities and not the CCI. "The Commission observes that besides antitrust law, the issue of the alleged sale of counterfeits on online platforms is amenable to be addressed through other legal/regulatory instrumentalities as well. Thus, though the Commission is statutorily constrained from looking into this issue because of the absence of OP-1's dominance, the issue of counterfeit may be addressed through other regulatory instruments in view of the adverse implications it has on sellers and buyers in general," it said.

"Though it is understood that online sale of counterfeits could be a matter of concern for brands and consumers alike, given that OP-1 (Amazon) is not dominant in the relevant market, the issue does not lend itself to antitrust scrutiny," the Commission concluded.