Flipkart and Amazon are being investigated for unfair practises — Here’s why8 min readReading Time: 5 minutes
Part 2 of this story is available. Click on the next page at the bottom of this article.
Amazon and Flipkart — India’s e-commerce giants — are under investigation for the alleged unfair practises on their platforms. This comes after the Supreme Court said that the Competition Commission of India (CCI) – which is a body that looks into preventing anti-competitive agreements and abuse of powerful companies — was free to investigate the platforms.
The reason the CCI is conducting this investigation is because some small traders who sell their products on the platforms claim that the latter are giving preferential treatment to certain sellers. India was already looking into regulating the e-commerce space more tightly. Essentially, this isn’t a great time for Flipkart (owned by the US company Walmart) and Amazon.
Understand CCI and competition policy
The CCI is a statutory body of the Government of India responsible for enforcing the Competition Act, 2002 and promoting competition throughout India and to prevent activities that have an appreciable adverse effect on competition in India.
The Competition Act, 2002
The basic aim of this Act is to ensure fair competition in the market. It also protects the freedom of trade for consumers and pulls up any company with a powerful position in the market from abusing its position.
Let’s go deeper into the matter…
What is the investigation all about?
The case was brought up by the Delhi Vyapar Mahasangh (DVM), a traders’ body that brough up practices such as exclusive mobile phone launches and deep discounts by these two platforms as affecting fair competition. They also alleged that the e-commerce giants were promoting selected sellers on their websites.
It was further claimed that among such preferred sellers were companies that had direct or indirect links with these platforms themselves, and were either connected to or controlled by them.
What do Flipkart and Amazon say?
Both companies strongly denied the allegations and said they were following all the relevant laws in India. They also moved (to make an application to a court for a rule or order, or to take action in any matter) the Karnataka High Court seeking to take back the CCI investigation, but the court decided that the probe could not be halted. That led the two firms to go to the Supreme Court.
This didn’t work in their favour either. The Supreme Court said that it “expects organisations like Amazon and Flipkart to volunteer for inquiry and transparency”.
The two companies had also asked Supreme Court to put on hold a CCI request for information in the form of 32 questions that sought details of their top sellers and products, but have now been directed to provide answers in four weeks. Following the Supreme Court order, Amazon and Flipkart have reportedly said that they will cooperate with the investigation.
Interestingly, coinciding with the Supreme Court order was an announcement that Cloudtail, one of the top sellers on Amazon, was going to stop operations from May 2022 after seven years. Cloudtail is owned by Prione Business Services, which, in turn is jointly operated by Amazon and Catamaran Ventures, owned by Infosys founder NR Narayana Murthy.
What do the e-commerce rules say?
In June this year, the Union Consumer Affairs Ministry had come up with amendments (minor changes) to the Consumer Protection (E-Commerce) Rules that had come into force in 2020.
The amendments propose a ban on ‘flash sales’ by e-commerce players involving “significantly reduced prices, high discounts or any other such promotions or attractive offers”, if they are “organised by fraudulently intercepting the ordinary course of business using technological means with an intent to enable only a specified seller or group of sellers managed by such entity to sell goods or services on its platform”.
The draft rules also propose that an e-commerce player shall ensure that “none of its related parties and associated enterprises are enlisted as sellers for sale to consumers directly”.
Phew! That was a lot to take in. Head over to the next page
to know more about this investigation!