The Karnataka High Court (HC) on Friday quashed Amazon India and Flipkart’s appeal against the investigation by antitrust Competition Commission of India (CCI), regarding alleged violations of the competition law.
This comes after a single-judge bench at Karnataka HC led by Justice P.S. Dinesh Kumar had dismissed Amazon and Flipkart’s writ petition on June 11 which challenged the CCI probe against their business practices, commissioned in January, last year.
The following week, both e-commerce majors had filed separate petitions with a division bench at the Karnataka HC, challenging the earlier decision, and arguing that the case wasn’t heard on ‘merit’.
“The appeals are devoid of merit, and deserve to be dismissed,” said the two-judge bench of Justice Satish Chandra Sharma and Justice Nataraj Rangaswamy.
The division bench also said that if the ‘appellants’ are not involved in any violation, they shouldn’t feel shy of an investigation by CCI.
E-commerce majors Amazon India and Flipkart are now expected to move to the Supreme Court of India, challenging the order, and requesting a stay on the CCI investigation, said two individuals aware of the discussion.
“We are awaiting to receive a copy of the order of the Division Bench of the Karnataka High Court and will review it as soon as we get it. As highlighted earlier, we have a very robust compliance and governance process and remain in full compliance with Indian laws. We will do everything to be always compliant,” said a Flipkart Group spokesperson replying to Mint’s queries on the matter.
In the past hearings, legal counsels of both Flipkart and Amazon have argued that the CCI has deviated from its own practice; and commissioned an investigation into the e-commerce entities without any clear evidence.
As a part of the hearings, last month, the Flipkart counsel also argued that with regards to the allegations surrounding preferential treatment, no (seller) agreement has been placed before CCI for it to start the investigation.
“We respect the judgment passed by the Hon’ble High Court and we will review the judgment in detail to determine any next steps,” said an Amazon spokesperson responding to Mint.
The matter came into the spotlight, after the Delhi Vyapar Mahasangh (DVM), a group of micro, small and medium enterprise (SME) owners, in 2019, submitted a plea with CCI against Flipkart and Amazon for abusing their market dominance and giving preferential listing and deep discounting on products sold by select vendors in which they control indirect stakes.
Based on the information received from DVM, CCI directed its director-general to launch a probe in January 2020 for alleged violation of Section 3 of the Competition Act.
“CAIT welcomes the Court order delivered today. It fully vindicates CAIT’s stand that Amazon and Flipkart business models are based entirely on violating the FDI policy and reside on mischievous business practices. Therefore, the CCI should immediately begin its probe without wasting any more time,” said B.C.Bhartia, national president of the Confederation of All India Traders (CAIT).
Karnataka HC decision to allow the CCI probe has come as a double whammy for Amazon and Flipkart, which already run the risk of unfavourable amendments to consumer protection e-commerce rules.
“It is increasingly becoming confusing for these foreign-held e-commerce firms in India. On one end the government is promoting FDI in the country, while on the other it is increasing the liability, launching probes and restricting the scope of these e-commerce firms,” said an individual quoted above.
“What can be concerning about this case is that the precedence it will set for the ecosystem. Tomorrow, any person can question the practices of these e-commerce firms and the CCI or government can launch a probe without enough evidence,” said an e-commerce executive, who didn’t want to be named.
Mint on Thursday reported that CCI also issued a show-cause notice to Amazon Inc., seeking to know why certain facts were not disclosed about its 2019 purchase of a 49% stake in a Future Group entity.
Source: Mint