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Flipkart appeals to Supreme Court to try and stop CCI probe: Report

Supreme Court of India
Credit: Aditi Agrawal

Flipkart’s appeal was met with caveats filed by trade bodies who want a CCI investigation into e-commerce platforms even as government-proposed changes to e-commerce rules are on the horizon. 

Walmart-owned Flipkart on Tuesday filed an appeal with the Supreme Court against the July 23 order by the Karnataka High Court, which refused to stay the antitrust probe initiated by the Competition Commission of India (CCI) into Flipkart and Amazon, Reuters reported. Amazon is also expected to file a similar appeal, the report added.

MediaNama has reached out to Flipkart for comments and will update the story once we receive them.

Why this matters? CCI initiated a probe into multiple allegations against Amazon and Flipkart in January 2020, but the investigation was immediately put on hold due to legal challenges. On June 11, the investigation was set to resume after the Karnataka HC dismissed the pleas by Amazon and Flipkart, but the two companies once again filed an appeal. The July 23 ruling dismissed these appeals and cleared the path for CCI to continue with its investigation, but Flipkart is now challenging this ruling.

Why has Flipkart approached the Supreme Court?

On July 23, a division bench of the Karnataka High Court dismissed the appeals filed by Amazon and Flipkart challenging an earlier ruling by a single judge that had allowed the probe by the Competition Commission of India (CCI) to resume.

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“Amazon and Flipkart’s appeals are devoid of merit and substance and deserve to be dismissed,” the two-judge division bench of the Karnataka HC said. “The applicants should not feel shy in facing inquiry by CCI if they are not in violation of the Competition Act,” the bench added, according to a CNBCTV18 report.

Flipkart is now challenging this dismissal in the Supreme Court.

CAIT and DVM file caveats

The Confederation of All India Traders (CAIT) and Delhi Vyapar Mahasangh (DVM) have also filed caveats in the Supreme Court anticipating challenges from Flipkart and Amazon, the Economic Times reported. Both CAIT and DVM have repeatedly complained to CCI about the anti-competitive practices by Amazon and Flipkart.

“A caveat is a notice submitted in anticipation by a person or an entity, informing the court that another person or entity may file a lawsuit or application against them and that the court should give the caveator (the person who has filed the caveat) a fair hearing before deciding on the matter brought in front of the court,” the report stated.

What is CCI investigating?

The CCI’s probe against Amazon and Flipkart was ordered to investigate four alleged violations:

  1. Exclusive launch of mobile phones
  2. Promoting preferred sellers on their websites
  3. Deep discounting practices
  4. Prioritising some seller listings over others

The CCI 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.

Other trade bodies have also filed complaints against Amazon and Flipkart with CCI. The All India Online Vendors Association (AIOVA), a trade union representing online sellers, filed an antitrust suit against Amazon India in August 2020, alleging preferential treatment to some sellers, and predatory pricing.

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Timeline of events

January 13, 2020: The CCI launched an investigation in January last year after multiple allegations against Amazon and Flipkart claimed that the firms were violating FDI regulations and are hurting smaller sellers by promoting certain preferred sellers. However, the Karnataka HC stayed this investigation after Amazon and Flipkart challenged it saying that CCI had no evidence that the two companies were harming competition. Since February last year, the investigation has been on hold.

October 26, 2020: The Supreme Court refused to hear a plea filed by the CCI, which sought to remove the Karnataka HC-directed stay on its probe against Amazon and Flipkart. Instead, the apex court directed the HC to decide on the matter within six weeks.

June 11, 2021: A single-judge bench of the Karnataka HC dismissed pleas by Amazon and Flipkart to quash the CCI investigation into the business practices of the firms. Justice PS Dinesh Kumar, while dismissing the petitions by Amazon and Flipkart and refusing them any further relief, was quoted by Reuters as saying, “It would be unwise to prejudge the issues … at this stage and scuttle the investigation.” and refused them any further relief.

June 15, 2021: Reuters reported that CCI will expedite the restarted investigation. People familiar with the matter told the news agency that CCI plans to demand information from both the e-commerce giants “as quickly as possible.”

June 17, 2021: Both Amazon and Flipkart challenged the Karnataka HC decision. In the appeal filed by Flipkart, the e-commerce company argues that the decision by the court to allow the probe to resume “was erroneous and must be put on hold”, the report by Reuters stated. “Irreparable injury will be caused to the appellant if the investigation was to continue pending the present appeal,” said Flipkart. Amazon filed a similar challenge, the report stated

July 23, 2021: A division bench of the Karnataka High Court dismissed the appeal filed by Amazon and Flipkart challenging the earlier ruling that had allowed the probe by the CCI to resume.

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Changes to e-commerce rules on the horizon

The CCI probe is set to resume at a time when the government is considering changes to the e-commerce regulations in response to repeated complaints against Amazon and Flipkart.

The government on June 21 proposed amendments that give the existing Consumer Protection (E-Commerce) Rules, 2020 more teeth. The proposed changes include new rules to address abuse of FDI regulations, the establishment of a grievance redressal mechanism, new display and labelling criteria for foreign goods, the prohibition of flash sales, introduction of fallback liability, among other things. Many of the proposed changes are in fact aimed at preventing e-commerce platforms from engaging in the alleged practices that the CCI is currently investigating.

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