Karnataka HC grants interim stay on CCI probe against Amazon, Flipkart

The order was delivered by Justice PS Dinesh Kumar on a petition filed by Amazon, seeking interim stay on the CCI probe order, after hearing the matter over the past three days

In a major relief to e-commerce majors Amazon India and Flipkart, the Karnataka High Court on Friday granted an interim stay on the Competition Commission of India’s (CCI’s) order of an investigation into some of the firms’ business practices.

The order was delivered by Justice P S Dinesh Kumar on a petition filed by Amazon, seeking an interim stay on the CCI probe order, after hearing the matter over the past three days.  The court has granted the respondents eight weeks to file a counter.

“While we welcome and respect the decision of the Hon’ble High Court of Karnataka, this is just a step in the legal process. We are confident about our compliance,” Amazon said on a statement following the HC order.

Amazon had made CCI, the Delhi Vyapar Mahasangh (DVM) and Flipkart as respondents.

The CCI had ordered the probe based on a complaint filed by trade body DVM last month, which alleged that these players were giving deep discounts on online sales of smartphones, apart from cherry-picking sellers.

“This is a big relief to both companies and the fact that the court gave this relief after hearing arguments for three days, shows that prima facie Flipkart and Amazon lawyers have been able to convince the court that the said CCI order was passed in an arbitrary manner,” said Salman Waris, managing partner at New Delhi-based law firm TechLegis Advocates & Solicitors. He said, the interim stay supported Amazon’s position that CCI order was “unreasonable, unwarranted, arbitrary and mala-fide.”

It was an extraordinary scene in the court, where the legal counsels of archrivals Amazon and Flipkart were on the same side, arguing passionately against the CCI’s probe.

On Friday, the court commented about a 2018 case involving the All India Online Vendors Association (AIOVA) and Flipkart, where the traders’ association accused Flipkart of abusing its dominant position. The CCI had invited Amazon to present its views as a third-party or expert. CCI had said at the time that Flipkart or Amazon had not violated any law.

The High Court found it strange that the CCI had changed its views. According to sources, Amazon has repeatedly gone out of its way to assist CCI to make it understand that there is nothing that the company is doing that can be challenged under the competition law.

“CCI ordered this investigation without even calling the company (Amazon). It was an ex-parte order, and, thus, the firm challenged it,” said a person familiar with the development.

On Friday, Flipkart’s counsel’s main contention revolved around Section 19 (3) of the Competition Act, which stipulates six parameters that CCI needs to consider while evaluating if a company has flouted norms. These include creation of barriers to new entrants, driving existing competitors out of the market and improvements in production or distribution of goods or provision of services. Counsel representing Flipkart on Friday said that some of those parameters were not considered by the CCI while ordering for a probe.

Meanwhile, the Confederation of All India Traders (CAIT) has said that the court stayed the CCI probe as the Enforcement Directorate (ED) has already initiated investigation into Flipkart and Amazon’s activities that are alleged to be in contravention of the foreign direct investment policy. 

Both CAIT and DVM said that they are consulting with their lawyers to file an appeal.

Praveen Khandelwal, CAIT national secretary general, termed the development “unfortunate and unexpected”, adding that the traders’ body would push the government to expedite the ED probe against these players to expose malpractices.