CCI had taken cognizance of a complaint to investigate deep discounting that has been allegedly extended to certain sellers among Amazon and Flipkart.
By Trisha Shreyashi
On 23 July, 2021, Hon’ble Division Bench (‘DB’) of Karnataka High Court (‘HC’) rendered a landmark decision in dismissing an appeal of online marketplace giants and declared the pleas for interference in order of investigation, as ‘premature’. The pronouncement paves the law of limitation on interference in an investigation order by Competition Commission of India (‘CCI’).
Delhi Vyapar Mahasangh(‘DVM’), a representative group of small & medium businesses, informed CCI against Flipkart’s and Amazon’s (hereinafter referred,‘e-comm giants’) alleged anti-competitive practices. (Delhi Vyapar Mahasangh Vs. Flipkart Internet Private Limited and Another & Amazon Seller Services Private Limited.) DVM alleged the e-comm giants of forming exclusive alliances with preferred sellers. It took cognizance of the complaint to investigate deep discounting that have been allegedly extended to certain sellers via exclusive tie-ups and preferential agreements, resulting in appreciable adverse effect on market dynamics.
CCI, post- perusal of DVM’s submissions and public information concluded that a prima facie case for investigation exists. Thereafter, it passed an order under 26(1) of the Competition Act (2002), directing the Director General, Investigation to probe into the allegations. Such order is neither determinative, nor adjudicative. However, the e-comm giants challenged it via writ petition(WP) filed before HC which was dismissed. Following the dismissal, the e-comm giants filed an appeal before DB contending that the criteria to initiate investigation is unfulfilled, and the order ‘untenable’.
The criteria includes existence of such agreement, between parties at different levels of production, which yields adverse effects on market competition. E-comm giants contend that such agreements don’t exist and that CCI failed to consider their submissions while ordering the inquiry. At this instance, one might be reminded of a similar issue in Google Inc. Ors. vs CCI (2015) where the Hon’ble Court opined that CCI need not hear the entity against whom the information has been made out, while making the prima facie observation. Moreover, all the parties involved put forth contentions, when the investigation procedure commences.
In the present instance, HC while examining the nature of the 26(1) order referred to the ratio decidendi in CCI vs SAIL(2010). The bench observed that such an order is a ‘direction simpliciter’, to cause an investigation. It opined that such enquiry order is merely an administrative order akin to departmental proceedings, not involving any adjudicatory process whatsoever. Thus, 26(1) order neither amounts to civil consequences, nor does it instill any rights or liabilities. Nonetheless, the bench subjected the order on reasoned grounds, as any quasi-judicial proceedings, on the basis of information given to CCI.
DB while upholding the Single Bench decision, termed 26(1) enquiry as merely ‘inquisitorial’ and devoid of verdict on merits. It further made a sardonic remark on the intent of the e-comm giants in approaching the judiciary to quash the proceedings in the pre-investigation stage itself, if anti-trust norms haven’t been flouted. Reiterating apex court’s observations in Union of India Vs. Kunisetty Narayana(2006), the HC reaffirmed that arbitrariness and incompetence of the issuing authority are the only grounds to challenge validity of 26(1) order.
The 26(1) direction encompasses a show cause notice and a tentative view that shall not play out if the investigation suggests lack of veracity in the allegations. It is vital to protect the interests of consumers and small producers during disruptions such as COVID-19, which has drastically altered the market dynamics. The anti-trust norms are instrumental in promoting open markets and oil the wheels of a vibrant economy.
(The author is a legal draughtswoman. She is a part of academia at Harvard Business Review and Cambridge University Press. Views are personal and not necessarily that of Financial Express Online)