CCI Can Probe Amazon, Flipkart: Karnataka High Court

Karnataka High Court makes way for CCI’s investigation against Amazon, Flipkart. 

Employees stand near an The Amazon Inc. logo is displayed above the reception counter at the company’s campus in Hyderabad, India. (Photographer: Dhiraj Singh/Bloomberg)
Employees stand near an The Amazon Inc. logo is displayed above the reception counter at the company’s campus in Hyderabad, India. (Photographer: Dhiraj Singh/Bloomberg)

The Karnataka High Court on Friday dismissed writ petitions filed by Inc. and Walmart-owned Flipkart against an order by the competition regulator, paving the way for its investigation arm to examine if the conduct of the two online retailers is anti-competitive.

The high court had earlier granted an interim stay to Amazon and Flipkart. The Competition Commission of India had challenged this before the Supreme Court, which directed the regulator to approach the high court for relief.

In its order on Friday, the high court stated a CCI order directing investigation is expected to be supported by “some reasoning”, which the regulator has fulfilled in this case.

The court noted that the CCI had examined the information regarding exclusive launch of mobile phones, preferred sellers on the market places, deep discounting, and preferential listing of private labels. A plain reading of the CCI’s order shows that it has looked at the information in detail and applied its mind, the high court pointed out.

“Therefore, it would be unwise to prejudge the issues raised by the petitioners [Amazon and Flipkart] in these writ petitions at this stage and scuttle the investigation.” - Karnataka High Court

The regulator’s order does not call for any interference, the high court said.

In January last year, the CCI had passed a prima-facie order against the two e-commerce companies. It had directed a probe into their practices like discounting practices, exclusive tie-ups and private labels, saying they’re anti-competitive.

The probe was ordered after a New Delhi-based trader group complained that the online retailers were promoting select sellers, hurting business for smaller firms.

The informant—Delhi Vyapar Mahasangh—had alleged that Flipkart and Amazon entered into vertical arrangements with their preferred sellers that were directly or indirectly under their control, leading to the foreclosure of other sellers.

After carrying an initial investigation of the allegations, the competition regulator concluded that there is a “prima facie” case against the online retailers.

Both Amazon and Flipkart had appealed this decision saying the regulator does not have “jurisdictional facts”. For any investigation of this nature, the companies had argued, there must be an anti-competitive agreement that can adversely impact the market. No such agreement has been placed on record, Amazon and Flipkart had said. And that no notice had been issued to them before the regulator passed its order.

The high court dismissed these arguments saying:

A prima facie order by the CCI is an “administrative direction” to one of its wings departmentally and without entering upon any adjudicatory process.

The Competition Act does not require issuance of any notice to any party before or at the time of formation of an opinion by the CCI on the basis of information received by it.