CCI probe: HC rejects Amazon & Flipkart’s pleas, says e-commerce majors shouldn’t shy from inquiry if they haven’t violated rules

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July 24, 2021 5:00 AM

The division bench comprising Justice Satish Chandra Sharma and Justice Nataraj Rangaswamy said “by no stretch of imagination” can the inquiry be quashed at this stage.

amazon flipkartA Flipkart Group spokesperson said the firm is waiting to receive a copy of the order and will review as soon as they get it.

In a major setback for Amazon and Flipkart, a division bench of the Karnataka High Court on Friday dismissed the individual appeals filed by the e-commerce firms challenging a probe by the Competition Commission of India (CCI) into their alleged anti-competitive business practices.

The division bench comprising Justice Satish Chandra Sharma and Justice Nataraj Rangaswamy said “by no stretch of imagination” can the inquiry be quashed at this stage. The bench further said Amazon and Flipkart should not feel shy of facing inquiry by the CCI if they have not violated provisions of the Competition Act. The appeals submitted by the firms are “devoid of merits and substance and deserve to be dismissed”, the bench stated.

The single bench of the Karnataka HC had last month given the CCI the go-ahead to probe the two e-commerce majors following which the companies had filed writ petitions challenging the order. In its appeal, Flipkart had said if the investigation was to continue, it would cause “irreparable injury” to the firm.

“We respect the judgment passed by the Hon’ble High Court and we will review the judgment in detail to determine any next steps,” Amazon said in a statement.

A Flipkart Group spokesperson said the firm is waiting to receive a copy of the order and will review as soon as they get it. “As highlighted earlier, we have a very robust compliance and governance process and remain in full compliance with Indian laws. We will do everything to be always compliant,” the spokesperson added.

The case dates back to January 2020 and saw several hearings and submissions made by the parties concerned. Following a plea by the Delhi Vyapar Mahasangh (DVM), the CCI in January 2020 had directed its director-general to probe Amazon and Walmart-controlled Flipkart, stating “…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 had then said the CCI order was passed without “prima facie application of mind”, and terming its findings “perverse, arbitrary, untenable in law”, had filed a writ petition in the Karnataka HC seeking a stay on the investigation.

In February 2020, the court had stayed the CCI investigation on the ground that the Enforcement Directorate (ED) had already initiated an investigation into the two firms’ operational activities alleged to be in contravention of the FDI (foreign direct investment) policy in e-commerce. In September 2020, the CCI filed an appeal in the Supreme Court against the interim stay order issued by the Karnataka HC, following which fresh hearing in the case started in the HC.

Welcoming the order delivered on Friday, the Confederation of All India Traders (CAIT) in a statement said: “It fully vindicates the stand of CAIT that Amazon and Flipkart’s business model is entirely based on violating the FDI policy, rules and other laws…therefore, without wasting any more time, the CCI should immediately begin its probe.”

Amazon and Walmart, which owns a majority stake in Flipkart, have lined up investments worth billions of dollars to expand their businesses in India. The companies saw manifold growth amid the pandemic as demand for online shopping boomed. Analysts at Goldman Sachs estimate Indian e-commerce to reach $112 billion in GMV (gross merchandise value) by FY25, growing at a 29% CAGR over FY20-25.

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