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US antitrust officials investigate Amazon’s marketplace practices


While the Competition Commission of India dismissed All India Online Vendor’s Association’s (AIOVA) complaint that Flipkart used its dominant position to favour certain sellers through “unfair or discriminatory pricing”, the Federal Trade Commission (FTC) of USA has reportedly begun interviewing small sellers on Amazon to ascertain if the company is using its market power to hurt competition, Los Angeles Times and Bloomberg reported.

Why is this important? For a lot of sellers, as the reports point out, 90% or more of their sales come from Amazon, because of which thy are vulnerable to Amazon’s demands and abrupt changes in policy.

Has FTC announced the investigation? While the FTC doesn’t usually confirm the individual companies until the investigation has concluded, these interviews indicate that the FTC is in the early stages of a serious investigation. It is currently learning how Amazon works with the intent of identifying illegal practices, and identifying Amazon-dominated markets.

What is FTC asking? As per the report, several attorneys and at least one economist, in their 90-minute long interviews, asked three merchants what percentage of revenue their businesses derived from Amazon versus other online marketplaces such as Walmart and eBay.

What are other issues with Amazon? Whether Amazon has an unfair advantage over third party merchants when it competes with them to sell similar products on its own platform, Bloomberg said.

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Is Amazon the only one to abuse its market power? No. The Justice Department is investigating Google, Facebook, Apple and Amazon to check if they are using anti-competitive and monopolistic practices. Facebook is also under FTC’s antitrust investigation. Last week, 50 state attorneys general also announced an antitrust probe into Google.

Developments in India

In the absence of an e-commerce law in India, there has been a lot of ambiguity about what is a marketplace, what is a platform and who is a vendor in the e-commerce business, and if the three can be the same entity.

  1. CCI conducted a similar survey: In May 2019, the CCI sent out a market study to all major e-commerce companies, manufacturers, wholesalers and retailers, hotels, restaurants, and payment systems seeking details of how inventory-based models work, factors and entities that influence pricing, nature of contracts between sellers and marketplaces, private labels, and B2B sellers — details that would have helped establish whether the e-commerce platforms’ claim that they are indeed only marketplaces and have no control over pricing and products is true or not. This survey report was released in August 2019. (Read about it here.)
  2. Offline traders want festive sales on e-commerce platforms banned: On September 13, Confederation of Al India Traders (CAIT) asked Commerce Minister Piyush Goyal to conduct an investigation into and place a blanket ban on festival sales by e-commerce companies for indulging in “predatory pricing” and “deep discounting”.
  3. AIOVA’s complaint against Flipkart: Earlier this year, CCI had dismissed AIOVA’s complaint that Flipkart was using its dominant position to favour certain sellers through “unfair or discriminatory pricing”. AIOVA had challenged this clean chit in National Company Law Appellate Tribunal (NCLAT) where, in the last hearing, the tribunal directed Flipkart and AIOVA to submit their written arguments.
  4. Offline retailers accuse Flipkart, Amazon of anti-competitive practices: At a panel discussion organised by the CCI on August 30, offline retailers said that Amazon and Flipkart are able to offer deep discounts at predatory prices because of venture capital. They also called for regulation of e-commerce.
  5. GOQii’s dispute with Flipkart: In May 2019, GOQii Technologies had sent a cease-and-desist notice to Flipkart for selling its fitness trackers at huge discounts without approval. GOQii called  Flipkart’s 70%-80% discounts “predatory pricing” and an anti-competitive practice. It also said that Flipkart was in violation of the new FDI rules for e-commerce which an online marketplace cannot influence prices directly or indirectly and must offer a level playing field to all vendors. This suit was ultimately settled.

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