KARNATAKA HC REJECTS CCI INVESTIGATION BY AMAZON AND FLIPKART

The Karnataka High Court on Friday, 11th June 2021, dismissed the writ petition filed by Amazon India and Flipkart challenging CCI’s order to initiate a probe against their anti-competitive practices.The Court stated that due to limitation of the power of judicial review under Article 226 of the Constitution of India, it cannot interfere with an order passed by an expert specialized body.It all started in January 2020, when CCI had ordered the director general to initiate a probe against these companies. CCI stated that it had a prima facie case in the complaint against e-commerce companies under section 26(1) of the Competition Act, 2002 relating to the discounting offers, anti-competition practices, etc.“26. Procedure for inquiry on complaints under section 19.— (1) On receipt of a complaint…if the Commission is of the opinion that there exists a prima facie case, it shall direct the Director General to cause an investigation to be made into the matter.”Section 19 states “19. Inquiry into certain agreements and dominant position of enterprise ..“Taking the cognizance of the allegation put by the Confederation of All India Traders [CAIT] and Delhi Vyapar Mahasangh [DVM], which said that action of these e-commerce companies were predatory in nature and favourable to certain selective sellers, in respect to providing huge discounts offer as well as different schemes to their customers.In justifying their claim, Preaveen Khandelwal, the secretary general of CAIT stated “It fully vindicates the stand of CAIT — that Amazon’s and Flipkart’s business model is entirely based on violating the FDI policy, rules and other law”. DVM said that these giant e-commerce companies are abusing their power and competitive position.After the initiation of the probe, the companies filed a petition before the Karnataka HC, the court in February 2020, granted an interim stay on the probe. In September 2020, CCI filed a petition before the Supreme Court of India against the interim order passed by the HC, challenging the same.

However, Justice Nageswara Rao sent the case back to the HC, stating that it should be heard as soon as possible in the next Month, October 2020. Since then, the case is heard on a regular basis.Before the HC, both the parties have argued whether the conduct of such a probe should be allowed or not. CCI on initiation of probe stated that it is not that if a probe is stated these companies are guilty of any act. It’s a mechanism of investigation under the Act to check over the antitrust policies. On the other hand, Flipkart and Amazon argued that CCI didn’t have enough evidence to make a prima facie merit to make such an order. They also emphasized on Section 26(1), that it is based on prima facie case and the law does not allow hearing before it is passed. Further, CCI should have informed the companies and allowed them to present their side before initiation of a probe.The company has challenged the conduct of the CCI as nothing but abuse of power if such probe is allowed and stated it to be “Perverse, arbitrary and untenable in law”.CCI, have however pointed out that allegations against these giant companies have impacted many small as well as middle scale businesses. The deep discounting, preferential treatment to certain vendors like Cloudtail which apparently also have its own minority stakes in them and indulge in anti-competitive policies. The main aspects of such companies are to capture the market with such unhealthy policies affecting the small players in such markets.The complaint has also mentioned certain sellers on Flipkart which have control over the inventory as well as the pricing of things with the e-tailer.On 11th June 2021, the Karnataka HC, through Justice PS Dinesh Kumar in deciding the petition, rejected the plea presented by e-commerce companies to quash the investigation into their business practices by Competition Commission of India.

The court allowed the restart of CCI’s investigation relating to the anti-competition policies by these e-commerce companies. The court has also rejected the plea for extension of the interim stay on the probe for two more weeks.The order can be challenged by the companies through an appeal within 30 days from the date of passing of such order.

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