Online retailer Flipkart and Amazon have approached the Supreme Court challenging a Karnataka High Court decision allowing an anti-trust probe against them.
Background and Allegations
In January 2020, the Competition Commission of India (CCI) had ordered the probe against both the e-commerce platforms. In a complaint ot the CCI, the Confederation of All India Traders (CAIT) and the Delhi Vyapar mahasangh (DVM) alleged that the companies are entering into anti-competitive measures agreements in violation of the Competition Act 2002.
The complaints were against:
- Deep Discounting: Flipkart provides deep discounts to a select few preferred sellers (such as Omnitech Retail) on its platform which adversely impacts non-preferred sellers such as members of the Informant from competing with such sellers on Flipkart’s online platform. The complainants also made similar allegations of deep discounts which are detrimental to non-preferred sellers.
- Preferential Listing: Flipkart lends the word “Assured Seller” to the products sold by its preferred sellers which allegedly creates a bias in favor of preferred sellers to the detriment of other sellers. Amazon lends the word “Fulfilled” to the products sold by preferred sellers and further allegedly creates search bias by listing its preferred sellers in the first few pages of the search results.
- Market Power: Further the complainants alleged that Amazon and Flipkart can cross-subsidize because of the huge amount of funding received from their investors. This has resulted in incentives that allow pricing below cost on their platforms, through their sellers, resulting in the creation of high entry barriers and high capital costs for any new entrant in the market.
Caveat of the complanants
The CCI had acted on a complaint by Delhi Vyapar Mahasangh and the Confederation of All India Traders (CAIT). They both have also filed caveats in the Supreme court anticipating challenges from e-commerce firms on the matter.
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 a fair hearing before deciding the matter.
High Court’s observation
After a Single Judge Bench of the High Court allowed the CCI to carry on with the investiation, both e-commerce companies filed an appeal before a Division Bench.
Last week, the Karnataka High Court Division Bench comprising of Justice Satish Chandra Sharma and Justice Nataraj Rangaswamy observed that “e-commerce firms should not feel shy of the probe if they haven’t violated any anti-trust laws.