CCI Investigation: Probe against Amazon, Flipkart stayed by Karnataka HC

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Updated: February 15, 2020 7:46:42 AM

The court observed that the Enforcement Directorate (ED) has already initiated investigation into the two firms' operational activities alleged to be in contravention of the FDI (foreign direct investment) policy in e-commerce.

CCI, Amazon, Karnataka High Court, Enforcement Directorate, CCI, Delhi Vyapar Mahasangh, walmart, FDI normsAmazon which counts India as a key market has infused billions of dollars in its business in the country.

In a relief for Amazon, the Karnataka High Court on Friday stayed the Competition Commission of India’s (CCI) investigation into US e-commerce giant and rival Flipkart’s alleged business practice of deep-discounting, preferential listing of sellers and exclusive pacts.

The court observed that the Enforcement Directorate (ED) has already initiated investigation into the two firms’ operational activities alleged to be in contravention of the FDI (foreign direct investment) policy in e-commerce. The court also noted that while the CCI had asked for Amazon’s comments in an earlier case filed by All India Online Vendors Association (AIOVA), the fair trade regulator should have held consultations with the parties in the present matter before passing the impugned order. “While we welcome and respect the decision of the High Court of Karnataka, this is just a step in the legal process. We are confident about our compliance,” said an Amazon spokesperson.

Last year, the ED initiated investigation against Amazon and Flipkart for alleged violation of the foreign exchange law. Following a plea by the Delhi Vyapar Mahasangh (DVM), the CCI in January had directed its director general to probe Amazon and Walmart-controlled Flipkart, stating that “…it needs to be investigated whether the alleged exclusive arrangements, deep-discounting and preferential listing by the Ops (opposite parties — Flipkart and Amazon) are being used as an exclusionary tactic to foreclose competition”.

Amazon which holds nearly 80% share in India’s e-commerce sector jointly with Flipkart had earlier this week filed a writ petition in the Karnataka High Court seeking a stay on the CCI probe. The company said the order has been passed without “prima facie application of mind”, while terming its findings as “perverse, arbitrary, untenable in law”. Amazon said the order will cause irreparable loss and injury to the company and its reputation.

Amazon which counts India as a key market has infused billions of dollars in its business in the country. Founder & CEO Jeff Bezos announced a fresh $1 billion investment in the country last month to digitally enable micro, small and medium enterprises and traders. This takes the Seattle-based firm’s total India investment commitment to $6 billion. Bezos who was in New Delhi last month to attend a company event also said the e-commerce major will use its global footprint to export $10 billion worth of ‘Make in India goods’ by 2025. Further, Amazon announced plans to create 1 million new jobs in the country by 2025.

The Confederation of All India Traders (CAIT) and DVM have decided to file an appeal against the order of the High Court. A CAIT delegation has also sought hearing with commerce minister Piyush Goyal and finance minister Nirmala Sitharaman to plead expedition of the ED investigation.

Traders have been holding country-wide protests against Amazon and Flipkart over predatory pricing. They also claim that the deep-pocketed firms have flouted FDI norms in e-commerce mandated by the government.

A year ago, the government’s revised FDI norms in e-commerce came into effect. The norms bar online firms having foreign investment like Flipkart and Amazon from selling products of the entities in which they hold stake or whose inventory they control. The norms disallowed them from asking a seller to sell any product exclusively on their platforms. Separately, the government is also in the process of devising an e-commerce policy to create a level-playing field between online and offline players.

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