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Supreme Court refuses to stop CCI probe into Amazon and Flipkart, gives them four weeks to respond to CCI’s queries

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 Supreme Court on Monday dismissed pleas by Amazon and Flipkart to stop the investigation by the Competition Commission of India (CCI) into the alleged anti-competitive practices of the two e-commerce companies.

Why it matters? CCI initiated a probe into the multiple allegations against Amazon and Flipkart in January 2020, but the investigation was immediately put on hold due to legal challenges by the two platforms. On July 23, 2021, the investigation was all set to resume after the Karnataka High Court dismissed the appeals filed by Amazon and Flipkart challenging an earlier ruling that had allowed the probe by the CCI to resume, but the two companies once again challenged this decision in the Supreme Court. This latest ruling by the Supreme Court clears the path for the CCI once and for all.

What did the Supreme Court say?

“We expect big organisations like Amazon and Flipkart to voluntarily go for inquiry and you don’t even want that?” a three-judge Supreme Court bench, led by Chief Justice N.V. Ramana asked, Bar and Bench reported. “You have to submit and enquiry has to be permitted,” Ramana added.

Both Flipkart and Amazon had appealed to the Supreme Court to halt the investigation saying that CCI does not have enough evidence to pursue the matter. Neither an anti-competitive agreement nor an adverse effect on competition, the two things required for a CCI probe, have been established to exist, Senior Advocate Gopal Subramanium, representing Amazon, submitted.

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The Supreme Court also gave Amazon and Flipkart four weeks to respond to the queries sent by CCI. According to Reuters, CCI on July 15 asked the two platforms to respond to 32 questions, including details of top 100 sellers, top-selling products, and policies on showcasing products on their websites. Amazon was specifically asked for copies of all agreements it signed with two of its sellers, Cloudtail and Appario, the report stated. The court refused to entertain the companies’ argument that such information is sensitive in nature.

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

Piyush Goyal welcomes the decision and slams companies for wielding influence

Legal tricks to halt investigation failed: “These companies tried even with their legal tricks to halt the investigation against them but it’s with extreme pleasure that I inform you that on the anniversary of Quit India Movement, Supreme Court has quashed their plea. The apex court decided that CCI should investigate them and the fraudulent and unfair trade practices used by the companies as informed by the government and small shopkeepers to CCI,” The Print reported commerce minister Piyush Goyal as saying.

Wielding influence to hurt small businesses and consumers: Goyal, who was speaking in the parliament, also pointed out that these e-commerce giants are wielding influence to hurt domestic small businesses and even consumers in the long run. “Big companies wield a lot of power owing to large amounts of money with them, they are trying their best to maintain their free will in the e-commerce market. To hurt our small business and traders. And after a while, it causes harm to our consumers in the long term,” the minister said, according to The Print. He also said that both the CCI and the Enforcement Directorate are investigating allegations made against these e-commerce companies.

Not just a matter of national concern: “This is a matter of not just national but also of international concern as these mighty technological companies through their big e-commerce outlets are spreading their area of dominance across the globe through their economic and capital prowess,” Goyal said, according to The Print. “With their dominance, these entities are wiping out small shops which is not only a concern in India but across the world,” he added.

What is CCI investigating?

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

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  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.

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.

Timeline of events

January 13, 2020: The CCI launches an investigation 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.

October 26, 2020: The Supreme Court refuses 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 directs the HC to decide on the matter within six weeks.

June 11, 2021: A single-judge bench of the Karnataka HC dismisses 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 refuses them any further relief.

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June 15, 2021: Reuters reports 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 challenge 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 dismisses the appeal filed by Amazon and Flipkart challenging the earlier ruling that had allowed the probe by the CCI to resume.“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.

July 28, 2021: Flipkart files an appeal with the Supreme Court against the July 23 order by the Karnataka High Court. Amazon also filed a similar appeal, Reuters reports.

August 6, 2021: The hearing is postponed to August 9.

Update (11 Aug, 4:40 pm): Added comments made by Piyush Goyal in parliament

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