SC stays NCLAT order for competition watchdog's probe against Flipkart

The Supreme Court on Wednesday stayed the National Company Law Appellate Tribunal's (NCLAT) March 4 order asking the Competition Commission of India (CCI) to initiate a probe against e-commerce major Flipkart for alleged use of its dominant position.

The NCLAT had held the prima facie Flipkart had contravened Section 4 of the Competition Act, 2002 which is connected with the abuse of dominant position and predatory pricing.

Senior advocate Harish Salve, appearing for Flipkart, said that the NCLAT did not look at the CCI findings, but instead relied on the tax department findings and also misread the findings of the tax tribunal in an unrelated case.

Contending that the order was passed on erroneous premise that Flipkart had a dominant position in the e-commerce market, Salve held that there were many players in this nature of business and it is not correct to label his client as a dominant player.

A bench headed by Chief Justice S.A. Bobde and comprising Justices A.S. Bopanna and V. Ramasubramanian, initially said the judgment of the tribunal is relevant and the bench is keen to send back the matter to the NCLAT.

Salve, however, argued that dominant position should enable a player to operate independently of competitive forces and indicated there were other major players like Amazon.

"Dominant is not the biggest, but you are big enough to call the shots. This is not the case with Flipkart," he said.

Salve cited the competition by Amazon to Flipkart in the e-commerce field, and insisted that if he is not a dominant player then the allegations of predatory pricing does not apply on Flipkart.

After a detailed hearing into the matter, the top court issued notice to All India Online Vendors Association (sellers association), who was on caveat, and the CCI.

The bench noted that the CCI has rendered a categorical finding that Flipkart does not have the dominant position and this finding has not been reversed by the NCLAT. Asking the vendor association if they were to agree that the NCLAT should have considered the issues of dominant position, it said: "Then, we can remand back the matter (to NCLAT)," said the bench.

The counsel for the vendor association replied her client would want to argue the matter. At this, the bench stayed the NCLAT order.

On March 4, the NCLAT has set aside the CCI order absolving Flipkart of unfair practices using its dominant position and directed it to ask its probe arm to investigate the allegations.

The NCLAT noted the vendor association had successfully made out their case. This vendor association in November 2018 had moved the CCI alleging abuse of market dominance by the e-commerce major.