Appellants shouldn't fear CCI probe, Karnataka HC tells Amazon, Flipkart

The Court upheld a single-judge order dismissing pleas filed by Amazon and Flipkart challenging a probe initiated by the Competition Commission for alleged breach of competition law

The Karnataka High Court on Friday upheld a single-judge order dismissing the pleas filed by Amazon and Flipkart. The e-commerce firm had challenged a probe initiated by the Competition Commission of India (CCI) for alleged competition law violations.

A division bench of Justices Satish Chandra Sharma and Natraj Rangaswamy passed the order in a batch of appeals moved by the e-commerce firms against a June 11 order of a Single Judge of the High Court.

While dismissing the plea, the Bench held, “By no stretch of imagination can inquiry be quashed at this stage...Appellants should not be afraid of investigation of CCI...In the considered opinion of the Court, appeals filed by appellants are devoid of merit and deserved to be dismissed…,” according to law platform Bar & Bench. The matter was reserved for judgement on June 25.

Amazon had approached the Karnataka High Court against a CCI order which had called for a Director General (DG) investigation into allegations of anti-competitive conduct in the online sale of smartphones on its platform.

The informant before the CCI, Delhi Vyapar Mahasangh (DVM), the traders’ body, was justifying the CCI decision for a probe. DVM had alleged that these players were giving deep discounts on online sales of smartphones, and cherry-picking sellers. Other allegations included predatory pricing and exclusive partnerships.

Experts such as Salman Waris, managing partner at technology law firm TechLegis Advocates and Solicitors said the court's decision has further reinforced the position of the petitioners that the CCI investigation should continue. “However there is a likelihood that Amazon and Flipkart are going to appeal the decision at the Supreme Court,” said Waris.

Walmart-owned Flipkart said it is awaiting to receive a copy of the order of the Division Bench of the Karnataka High Court and will review it as soon as the firm gets 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.

DVM is an affiliate of the trade body Confederation of All India Traders (CAIT). CAIT welcomed the Court order.  "It fully vindicates the stand of CAIT that Amazon and Flipkart business model is entirely based on violating the FDI policy, rules and other laws, mischievous business practices, therefore,  without wasting any more time, the CCI should immediately begin its probe,” said  B.C.Bhartia, National President and Praveen Khandelwal, Secretary-General of the Confederation of All India Traders (CAIT).

CAIT was represented by Advocate Gautam Aditya and Delhi Vyapar Mahasangh was represented by Advocate Abir Roy.

CAIT said that CCI found a prima facie case for investigation against Amazon and Flipkart for violating competition law and distorting the level playing field in January 2020. Amazon and Flipkart approached the Karnataka High Court in Feb 2020 and obtained a stay on the probe. The CCI approached the Supreme Court and the Supreme Court directed the Karnataka High Court to hear the matter. Thereafter the matter was heard for nearly 40 days by the Single Judge Bench of Karnataka High Court quashing the plea of Amazon and Flipkart which was challenged by both e-tailers in Double Bench of Karnataka High Court and order was reserved, which was pronounced on Friday.

Bhartia and Khandelwal of CAIT said that with the pronouncement of judgement there is no bar for conducting investigations into the business model of Amazon and Flipkart. They alleged that these players are continuing with mal-practices and dodging the law, rules and policies of the Country. They said it is for both the Central and State Governments to bring to the books, the people who are continuously violating the law and the rules and speedy actions should be immediately taken against Amazon, Flipkart and others.

Bhartia and Khandelwal said that foreign companies particularly in the e-commerce sector have been taking India as a banana republic where the laws, policies and rules have no sanctity and they have been provided with impunity to manipulate them according to their wish. “Unfortunately they have been successfully violating the law and the policies, bringing many disadvantages to the small traders of the country,” alleged Bhartia and Khandelwal.