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‘Flipkart abuses its dominant position,’ online vendors tell NCLAT

On July 30, during the first hearing of All India Online Vendors Association’s (AIOVA) appeal against the Competition Commission of India’s (CCI) clean chit to Flipkart over the issue of abuse of dominant position to favour “preferred sellers” through unfair and discriminatory pricing, the National Company Law Appellate Tribunal (NCLAT) questioned the nature of Flipkart as a platform and scheduled the next hearing for August 14 at 11:30 am.

In the Chairperson’s Court, the three-person bench, comprising NCLAT Chairperson Justice S. J. Mukopadhaya, Justice A. I. S. Cheema (Judicial Member), and Kanthi Narahari (Technical Member), instructed Chanakya Basa, who was representing AIOVA, to answer three questions in the next hearing:

  • What is the product that online vendors sell? Is it a virtual product (referring to data collection by Flipkart)?
  • How do members of AIOVA use the platform?
  • Does AIOVA pay to use Flipkart’s platform, unlike the general public who instead give up their data?

Amit Sibal, Rajshekhar Rao and Yaman Verma are representing Flipkart in this case. There is no CCI lawyer on record.

Tribunal: Is Flipkart abusing its dominance?

Justice Mukopadhaya asked Basa what Flipkart’s market share was to understand if the company truly dominated the market. Basa cited a news report which predicted that Flipkart would account for 40% of the market share. The judge refused to accept it on the grounds that it was a projection that was used to justify allegations of current market dominance. He further said that a 40% market share meant that 60% was with someone else. To Basa’s argument that the remaining 60% could be distributed in different ways (10%-20%-10%-20%), the judge said dominance was possible only when the vendor had “no other platform”, or if “other platforms had no other customers”.

According to Section 26(1) of the Competition Act “the [Competition] Commission is of the opinion that there exists a prima facie case, it shall direct the Director General to cause an investigation to be made into the matter”. Justice Mukopadhaya said that according to the CCI judgement, a prima facie case had not been made, and it was the responsibility of AIOVA to make a prima facie case, not NLCAT’s.

Is Flipkart the same as Amazon and Walmart?

Justice Mukopadhaya queried, “What is Amazon? Do they sell their products or (are products) sold through them?” Basa argued that Flipkart was bigger than Amazon because Walmart had acquired a majority stake in it for $16 billion. The judge refused to consider Walmart because of two reasons: first, Walmart is a brick and mortar chain, not an online platform; second, Walmart has a stake in Flipkart, it is not Flipkart.

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On being asked what Flipkart was, Basa replied that it was a platform and a B2B service. Justice Mukopadhaya disagreed with him because Flipkart “does not manufacture”. Basa cited Flipkart’s private labels Billion and SmartBuy, but Justice Mukopadhaya dismissed them as “third party” products, that is, Flipkart could not be looked at as Flipkart, but a sum of individual entities.

Basa argued that Flipkart.com, not Flipkart Internet Private Limited, was the wholesale arm.

AIOVA: Flipkart creating a class of preferred sellers

Basa argued that Flipkart had multiple subsidies that purchased goods from different sellers and sold them at a loss through preferred sellers, such as WS Retail. Normal sellers, Basa continued, were unable to compete with Flipkart’s B2B operations.

Justice Mukopadhaya confirmed with Basa if the vendors who are a part of AIOVA sold their goods on Flipkart. Basa answered in the affirmative and said, “We solely sell it to Flipkart marketplace.”

AIOVA’s year-old tiff with Flipkart

In November 2018, AIOVA had alleged that Flipkart used its dominant market position to favour certain sellers through “unfair or discriminatory” pricing. The association argued that by selling goods to companies such as WS Retail, which then sells the products on Flipkart, Flipkart was creating a class of preferred sellers. Also, Flipkart’s own private labels such as SmartBuy and Billion created a conflict of interest.

The CCI had dismissed [pdf] the allegation in November 2018 that Flipkart was preventing the entry of other players, and reasoned that Flipkart cannot be giving preferential treatment to WS Retail, as it stopped being a seller on Flipkart from April 2017.

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AIOVA subsequently filed an appeal in NCLAT over the issue, and this petition was admitted in May 2019. On June 19, Flipkart filed its reply to the petition, and on July 29, a day before the first hearing, AIOVA filed its rejoinder. CCI has not filed its counter thus far.

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