Update at 17:30: The Karnataka High Court has ordered a 2-month stay on the CCI probe against Amazon and Flipkart, Hindustan Times reported. Amazon told MediaNama that it welcomes the court’s decision, and is confident about its compliance.
Update at 14:10: The Karnataka High Court has reportedly stayed the CCI investigation, granting interim relief to Amazon, according to a Bar & Bench update. Senior Advocates Gopal Subramanium and Sajan Poovayya had appeared on behalf of Amazon India, per the update. We have reached out Amazon for comment.
— Bar & Bench (@barandbench) February 14, 2020
A day after Amazon argued in Karnataka High Court that Competition Commission of India’s (CCI) investigation — into the company’s alleged competition law violations — lacked prima facie evidence, the CCI said the e-commerce giant’s submission was a “mischevious one” and that arguments claiming that the CCI did not follow due process in gathering evidence were unfounded, reported the Economic Times.
The competition regulator reportedly argued Amazon was misguiding the court by stating that CCI was overstepping its jurisdiction, and added that compliance with FDI laws does not give Amazon immunity from other laws of the country. The CCI had ordered a probe into alleged competition law violations by Amazon and Flipkart on January 13.
Amazon questions CCI’s evidence: Amazon had argued in the Karnataka HC that the probe was based on information from a group of smartphone traders, who had made similar unsuccessful accusations in the past. As per Economic Times, Amazon also raised concerns about other evidence used against it, such as the validity of a screenshot that reportedly showed brands promoting new phone launches. It also argued that the evidence, of mails where sellers were allegedly influencing prices of items sold, was irrelevant in the case.
Amazon had filed a writ petition on February 10 in the Karnataka High Court, seeking a stay on CCI’s probe. The US e-commerce company had claimed that the CCI had passed the order to investigate the alleged anti-trust issues “without application of mind” and that it will cause “serious prejudice” against the company.
Why CCI is probing Amazon
The CCI’s probe against Amazon and Flipkart was ordered to investigate four alleged violations:
- Exclusive launch of mobile phones
- Preferred sellers on the platforms
- Deep discounting
- Preferential promotion of private labels.
It had initiated the probe following a complaint filed by the Delhi Vyapar Mahasangh (DVM), a group of MSME (Micro, Small and Medium Enterprises) smartphone traders. DVM had accused that Amazon has certain agreements with sellers (that are allegedly controlled by the company) and that it gives these sellers unfair preferential treatment over others. These vertical agreements give an advantage to the preferred sellers, such as in the form of a preferential listing, where Amazon gives the word ‘fulfilled’ to the seller and creates a search bias for the products sold by them, the complaint said. Amazon was also accused of offering prices that were significantly lower than the actual costs, by utilising the massive resources the company possesses, which allegedly results in the creation of high entry barriers for other traders.
Traders accuse Amazon of impacting economy negatively: Both the e-commerce platforms were accused of creating an “inherently anti-competitive” model for the e-commerce industry. The complaint by DVM said that the current practices employed by the company exclude other competitors from the market and that this can have far-reaching consequences on the economy of the nation.
Following the complaint, the CCI had noted:
“…the Commission is of the opinion that there exists a prima facie case which requires an investigation by the Director General (‘DG’), to determine whether the conduct of the OPs [opposite parties, Amazon and Flipkart] have resulted in contravention of the provisions of Section 3(1) of the Act read with Section 3(4) thereof.”
It is worth noting that Amazon has dismissed allegations of predatory pricing and deep discounting in the past and claimed that it is a pure marketplace and that sellers have the flexibility to set their own prices.