CCI probe: Flipkart moves SC against NCLAT probe order

By: |
August 28, 2020 7:10 AM

The NCLAT order was based on a January 2019 plea by AIOVA urging the appellate tribunal to “set aside” the CCI’s order absolving Flipkart of abusing its dominant position. The orders of CCI can be challenged in the NCLAT.

The NCLAT order was based on a January 2019 plea by AIOVA urging the appellate tribunal to “set aside” the CCI’s order absolving Flipkart of abusing its dominant position.

In what may lead to a long drawn legal battle, Walmart-owned Flipkart has moved the Supreme Court challenging the National Company Law Appellate Tribunal’s (NCLAT) March order which directed the Competition Commission of India (CCI) to launch a probe against the e-commerce firm on alleged charges of abuse of dominant position.

The tribunal had ordered a probe after setting aside the CCI’s 2018 order which had absolved Flipkart of such allegations levelled by the All India Online Vendors’ Association (AIOVA).

The AIOVA had filed a caveat in March itself in the Supreme Court, anticipating that Flipkart may move to apex court at some stage. This means that when the SC decides to hear the case, it would have to listen to the case put forward by AIOVA.

Both Flipkart and AIOVA did not respond to FE’s queries on Thursday.

The NCLAT order was based on a January 2019 plea by AIOVA urging the appellate tribunal to “set aside” the CCI’s order absolving Flipkart of abusing its dominant position. The orders of CCI can be challenged in the NCLAT.

The AIOVA in its appeal to NCLAT had stated that the CCI order is liable to be quashed as the fair trade regulator “was unjust in ruling out dominance prima facie even after it had submitted ample evidence to prove otherwise”. The association had said that in a series of information filed before the CCI, it had established the dependence of sellers on Flipkart ― AIOVA had said the user reviews and ratings create a “lock-in effect on sellers”. The sellers pay platforms a fee for better placement of their product on the website. In the event the sellers shift to another platform, they have to work from scratch again by investing time and money to move the product at the top of the search bar.

The AIOVA in the NCLAT petition had said the policy on foreign direct investment (FDI) in commerce was formulated by the government because the e-commerce entities were responsible for “disrupting the market through discounts and preferential treatment”. It had said that it had outlined the financial risk and high capital cost involved in the sector ― a factor to establish dominance. Citing regulatory filings, AIOVA had said that respondents (Flipkart India and Flipkart Internet) have lost what is equivalent to half of the $6.1 billion it raised from investors since inception a decade ago.

The AIOVA had said that the CCI order suffers from “non-application of mind as certain key facts were misconstrued”. The association argued that through its filing before the CCI in July 2018, it brought to the commission’s notice that WS Retail and Tech Connect Retail (sellers on Flipkart) were paying reduced platform fees resulting in foreclosure of competition.

The CCI in its order dated November 6, 2018, had stated, “Flipkart India is not dominant in the relevant market of services provided by online marketplace platforms for selling goods in India..therefore the issue of abuse of dominant position does not arise”. No case of contravention of the provisions of section 4 of the Competition Act is made out against Flipkart India (wholesale unit) and Flipkart Internet (marketplace), the CCI had said.

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