CCI probe: Flipkart moves SC against NCLAT probe order

Walmart-owned Flipkart has moved the Supreme Court challenging the National Company Law Appellate Tribunal’s (NCLAT) March order which directed the Competition Commission of India (CCI) to launch a probe into alleged charges against Flipkart’s abuse of dominant position.

The NCLAT had ordered a probe after setting aside the CCI’s 2018 order which had relieved Flipkart of such allegations levelled by the All India Online Vendors’ Association (AIOVA).

Anticipating that Flipkart may move the Supreme Court, the AIOVA had filed a caveat in March in the Supreme Court. Whenever the Supreme Court decides to hear the case, it would have to listen to the case put forward by AIOVA also.

The NCLAT order was based on a January 2019 plea by AIOVA urging the appellate tribunal to “set aside” the CCI’s order absolving Flipkart of abusing its dominant position.

The AIOVA in its appeal to NCLAT had stated that the CCI order is liable to be quashed as the fair trade regulator “was unjust in ruling out dominance prima facie even after it had submitted ample evidence to prove otherwise”.

The association had said that in a series of information filed before the CCI, it had established the dependence of sellers on Flipkart. AIOVA had said the user reviews and ratings create a “lock-in effect on sellers”. The sellers pay the platforms a fee for better placement of their product on the website. In case the sellers move to another e-commerce platform, they have to begin working from the scratch and invest the time and money to move the product at the top of the search bar.

The AIOVA in the NCLAT petition had said the policy on foreign direct investment (FDI) in commerce was formulated by the government because the e-commerce entities were responsible for “disrupting the market through discounts and preferential treatment”. According to AIOVA, it had highlighted the financial risk and high capital cost involved in the sector which proved dominance by Flipkart.

The AIOVA had said that the CCI order suffers from “non-application of mind as certain key facts were misconstrued”. The association argued that through its filing before the CCI in July 2018, it brought to the commission’s notice that WS Retail and Tech Connect Retail (sellers on Flipkart) were paying reduced platform fees resulting in foreclosure of competition.

The CCI in its order dated November 6, 2018, had stated, “Flipkart India is not dominant in the relevant market of services provided by online marketplace platforms for selling goods in India..therefore the issue of abuse of dominant position does not arise”. The CCI also said that there was no case of contravention of the provisions of section 4 of the Competition Act against Flipkart India (wholesale unit) and Flipkart Internet (marketplace).