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Amazon/Flipkart Antitrust Investigation

Delhi Vyapar Mahsangha which is an affiliate of India’s biggest trade body, Confederation of
All India Traders (CAIT), that represents 80 million retailers.
Delhi Vyapar Mahasangha’s complaint against the e-commerce giants Flipkart and Amazon
triggered an investigation by the Competition Commission of India (CCI).
The investigation began in the year 2020 based on the allegations that Amazon and Flipkart
are allegedly promoting certain sellers with which they had business arrangements and giving
priority to certain listings.
On 9 Aug, A 1027 paged report was prepared on Amazon and a separate 1696 paged report
was prepared on Flipkart. The said investigations revealed that the two companies were found
to have created an ecosystem where preferred seller appeared higher in search results,
elbowing out other sellers.
The Alleged anti-competitive practices were found to be true in the investigation.
In its report on Flipkart, the CCI noted that select sellers received special benefits, such as
low-cost marketing and delivery services. These sellers were enabled by Flipkart to offer
heavily discounted phones, which the CCI classified as predatory pricing that stifled
competition.
The report also emphasized that such anti-competitive practices were not limited to mobile
phone sales but extended to other product categories. Although Flipkart and Amazon
attempted to halt the investigation through legal actions, the Supreme Court permitted it to
proceed in 2021.
Flipkart Internet Pvt. Ltd. vs Competition Commission of India (2021)
Facts:
Flipkart Internet Pvt. Ltd. operates an e-commerce platform, allowing third-party sellers to
market their products online. Delhi Vyapar Mahasangh, a trader association, filed an
information against Flipkart and Amazon with the Competition Commission of India (CCI) in
2019, alleging violations of the Competition Act, 2002.
The allegations were based on practices like deep discounting, preferential listing of certain
sellers, and exclusive tie-ups with mobile phone manufacturers. These practices were claimed
to have an appreciable adverse effect on competition (AAEC), thereby violating Sections 3(1)
and 3(4) of the Competition Act, 2002.
The CCI issued an order in January 2020, directing an investigation into the activities of both
Flipkart and Amazon under Section 26(1) of the Competition Act. This order was challenged
by Flipkart before the Karnataka High Court, arguing that the CCI's order lacked a proper
prima facie finding of a violation.
Flipkart claimed that the CCI’s investigation order had no adequate reasoning or basis to
support the charges, citing the Supreme Court’s ruling in CCI v. Steel Authority of India Ltd.
(SAIL).
Issues:
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1. Whether the CCI’s order for investigation under Section 26(1) complied with the
requirement of establishing a prima facie case of violation of the Competition Act.
2. Whether the practices of deep discounting, preferential listing of sellers, and exclusive
tie-ups amount to anti-competitive practices under Section 3(1) and Section 3(4) of
the Competition Act.
3. Whether the CCI acted beyond its powers in ordering an investigation without proper
reasoning or factual basis.
Contentions of the Parties:
 Flipkart’s Contentions:
Flipkart argued that the CCI’s order did not meet the necessary threshold of forming a prima
facie opinion regarding a violation of the Competition Act, as required under Section 26(1).
They contended that the CCI failed to explain how the alleged practices caused an
appreciable adverse effect on competition (AAEC).
Flipkart claimed that it operates only as a platform provider and does not participate in the
actual sale of goods, asserting that any agreements with sellers or manufacturers did not
qualify as vertical agreements under Section 3(4).
Additionally, Flipkart argued that the CCI wrongly applied the test for ordering an
investigation by assuming that deep discounting and exclusive tie-ups automatically lead to
AAEC.
 CCI’s Contentions:
The CCI maintained that its order directing an investigation was based on credible
information and fulfilled the requirements of Section 26(1).
It argued that deep discounting and exclusive arrangements with preferred sellers limited
competition and created barriers for other sellers in the market.
The CCI contended that, at the investigation stage, it only needed to determine whether there
was enough material to form a prima facie case and did not need to provide extensive reasons
or evidence at this stage.
The Delhi Vyapar Mahasangh, supporting the CCI’s stance, argued that Flipkart’s practices
were aimed at market foreclosure and preferential treatment for specific sellers, which
undermined a fair competitive market.
Judgment:
The Karnataka High Court, presided over by Justice Satish Chandra Sharma and Justice
Nataraj Rangaswamy, dismissed Flipkart’s writ petition and upheld the CCI’s order for
investigation.
The court held that the CCI’s directive under Section 26(1) was merely an administrative
order and did not require detailed reasoning at this stage. The court noted that the CCI is not
conducting an adjudicatory process when ordering an investigation, and its role was limited
to determining whether there was a prima facie case.
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The court referred to the Supreme Court’s judgment in CCI v. SAIL, stating that while the
CCI does need to form a prima facie opinion, it is not required to undertake an extensive
analysis of the facts at the investigation stage. It concluded that the CCI had provided "some
reasons" for ordering the investigation, which was sufficient.
The judgment dismissed Flipkart’s contention that the CCI failed to establish a prima facie
case, ruling that the prima facie standard is inherently low and only requires the commission
to show a basic suspicion of a violation.
Amazon Seller Services Pvt. Ltd. & Flipkart Internet Pvt. Ltd. vs. Competition
Commission of India (2021)
Court: Karnataka High Court, Bengaluru
Bench: Justice P.S. Dinesh Kumar
Facts:
Amazon Seller Services Pvt. Ltd. and Flipkart Internet Pvt. Ltd. filed writ petitions seeking to
quash the Competition Commission of India's (CCI) order dated January 13, 2020, which
directed an investigation under Section 26(1) of the Competition Act, 2002. The petitions
alleged violations of anti-competitive practices by Amazon and Flipkart, primarily in the
form of vertical agreements with preferred sellers, resulting in deep discounting, preferential
listing, and exclusive tie-ups, thereby causing an appreciable adverse effect on competition
(AAEC).
Delhi Vyapar Mahasangh, a society of micro, small, and medium enterprises, initiated the
complaint, alleging violations of Sections 3 and 4 of the Competition Act, which pertain to
anti-competitive agreements and abuse of dominant position.
Issues:
1. Whether the CCI’s order directing an investigation was administrative or adjudicatory
in nature.
2. Whether prior notice or an opportunity for hearing is mandatory before issuing
directions for investigation under Section 26(1) of the Act.
3. Whether the CCI applied its mind properly in determining that there was a prima facie
case warranting investigation into Amazon and Flipkart's alleged anti-competitive
practices.
4. Whether the allegations regarding exclusive agreements, deep discounting, and
preferential listing justified the investigation.
5. Whether the CCI could exercise its jurisdiction when the Enforcement Directorate
(ED) was already investigating related aspects under the Foreign Direct Investment
(FDI) policy.
Contentions of the Parties:
Amazon:
Argued that CCI's order was ultra vires and lacked application of mind.
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Alleged that the complaint was initiated by Confederation of All India Traders (CAIT), using
Delhi Vyapar Mahasangh as a proxy after failing to obtain orders in other proceedings.
Claimed that the CCI’s order failed to analyze AAEC, and the investigation would cause
hardship to the petitioners.
Contended that exclusive deals between sellers and online platforms were common, and deep
discounting promoted competition rather than stifling it.
Argued that the ED was already investigating FDI violations, and CCI should not overlap this
inquiry.
Competition Commission of India (CCI):
Defended its order as an administrative direction, not requiring notice at the prima facie
stage.
Argued that the petitioners did not challenge the CCI’s inherent jurisdiction to direct the
investigation.
Stressed that the investigation was necessary to explore potential anti-competitive practices,
including exclusive agreements, preferential listings, and deep discounting strategies.
Delhi Vyapar Mahasangh:
Alleged that Amazon and Flipkart had vertical agreements with preferred sellers, distorting
the market by offering deep discounts and giving preferential treatment to a few sellers.
Claimed that Amazon and Flipkart’s practices caused foreclosure of non-preferred sellers and
limited competition in the online marketplace.

Judgement:
The Court held that the CCI’s direction under Section 26(1) to investigate was an
administrative order, not adjudicatory. Therefore, it did not determine any rights or
obligations of the parties at this stage and did not require the issuance of a notice or an
opportunity for hearing.
Citing Supreme Court rulings in CCI vs. SAIL and CCI vs. Bharti Airtel, the Court reaffirmed
that no notice or hearing was necessary before directing an investigation under Section 26(1).
The threshold for establishing a prima facie case was low, and CCI only needed to apply its
mind to the information provided.
The Court observed that the CCI had reviewed the material provided by the informant and
had analyzed the allegations in the context of exclusive launches, preferred sellers, deep
discounting, and preferential listing practices. There was sufficient basis for CCI to infer
prima facie violations of the Competition Act, warranting further investigation.
The Court rejected the argument that CCI lacked jurisdiction due to an ongoing ED
investigation. It emphasized that the FDI policy under FEMA and the Competition Act
operated in different spheres, and CCI had jurisdiction to investigate anti-competitive
practices, irrespective of ED’s inquiry.
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The Court dismissed the arguments that the investigation would damage the petitioners'
reputations, noting that the investigation was only preliminary and did not determine liability.
Additionally, the Court found no evidence of procedural unfairness in CCI's order.
Then the matter was taken to the Supreme Court of India.
(Cases : Flipkart Internet Private Ltd vs Competition Commission of India- SLP(c)
No.11558/2021, Amazon Seller Services Private Ltd vs Competition Commission of India-
SLP(c) No.11615/2021)
A bench comprising Chief Justice of India NV Ramana, Justices Vineet Saran and Surya
Kant refused to interfere with the orders of the Karnataka High Court which refused to
interfere with the preliminary enquiry ordered by the Competition Commission of India
(CCI) into their alleged anti-competitive practices.

PROVISIONS OF COMPETITION ACT 2002.

CHAPTER II PROHIBITION OF CERTAIN AGREEMENTS, ABUSE OF
DOMINANT POSITION AND REGULATION OF COMBINATIONS
Prohibition of agreements Anti-competitive agreements
SECTION 3.
(1) No enterprise or association of enterprises or person or association of persons shall enter
into any agreement in respect of production, supply, distribution, storage, acquisition or
control of goods or provision of services, which causes or is likely to cause an appreciable
adverse effect on competition within India.
(2) Any agreement entered into in contravention of the provisions contained in subsection (1)
shall be void.
(3) Any agreement entered into between enterprises or associations of enterprises or persons
or associations of persons or between any person and enterprise or practice carried on, or
decision taken by, any association of enterprises or association of persons, including cartels,
engaged in identical or similar trade of goods or provision of services, which—
(a) directly or indirectly determines purchase or sale prices;
(b) limits or controls production, supply, markets, technical development, investment or
provision of services;
(c) shares the market or source of production or provision of services by way of allocation of
geographical area of market, or type of goods or services, or number of customers in the
market or any other similar way;
(d) directly or indirectly results in bid rigging or collusive bidding, shall be presumed to have
an appreciable adverse effect on competition: Provided that nothing contained in this sub-
section shall apply to any agreement entered into by way of joint ventures if such agreement
increases efficiency in production, supply, distribution, storage, acquisition or control of
goods or provision of services.
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Explanation.—For the purposes of this sub-section, “bid rigging” means any agreement,
between enterprises or persons referred to in sub-section (3) engaged in identical or similar
production or trading of goods or provision of services, which has the effect of eliminating or
reducing competition for bids or adversely affecting or manipulating the process for bidding
(4) Any agreement amongst enterprises or persons at different stages or levels of the
production chain in different markets, in respect of production, supply, distribution,
storage, sale or price of, or trade in goods or provision of services, including—
((a) tie-in arrangement;
(b) exclusive supply agreement;
(c) exclusive distribution agreement;
(d) refusal to deal;
(e) resale price maintenance, shall be an agreement in contravention of sub-section (1) if such
agreement causes or is likely to cause an appreciable adverse effect on competition in India.
Explanation.—For the purposes of this sub-section,—
(a) “tie-in arrangement” includes any agreement requiring a purchaser of goods, as a
condition of such purchase, to purchase some other goods;
(b) “exclusive supply agreement” includes any agreement restricting in any manner the
purchaser in the course of his trade from acquiring or otherwise dealing in any goods other
than those of the seller or any other person;
(c) “exclusive distribution agreement” includes any agreement to limit, restrict or withhold
the output or supply of any goods or allocate any area or market for the disposal or sale of
the goods;
(d) “refusal to deal” includes any agreement which restricts, or is likely to restrict, by any
method the persons or classes of persons to whom goods are sold or from whom goods are
bought;
(e) “resale price maintenance” includes any agreement to sell goods on condition that the
prices to be charged on the resale by the purchaser shall be the prices stipulated by the seller
unless it is clearly stated that prices lower than those prices may be charged.
(5) Nothing contained in this section shall restrict—
(i) the right of any person to restrain any infringement of, or to impose reasonable conditions,
as may be necessary for protecting any of his rights which have been or may be conferred
upon him under—
(a) the Copyright Act, 1957 (14 of 1957);
(b) the Patents Act, 1970 (39 of 1970);
(c) the Trade and Merchandise Marks Act, 1958 (43 of 1958) or the Trade Marks Act, 1999
(47 of 1999);
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(d) the Geographical Indications of Goods (Registration and Protection) Act, 1999 (48 of
1999);
(e) the Designs Act, 2000 (16 of 2000);
(f) the Semi-conductor Integrated Circuits Layout-Design Act, 2000 (37 of 2000);
(ii) the right of any person to export goods from India to the extent to which the agreement
relates exclusively to the production, supply, distribution or control of goods or provision of
services for such export
SECTION 26.
(1) On receipt of a reference from the Central Government or a State Government or a
statutory authority or on its own knowledge or information received under section 19, if the
Commission is of the opinion that there exists a prima facie case, it shall direct the Director
General to cause an investigation to be made into the matter: Provided that if the subject
matter of an information received is, in the opinion of the Commission, substantially the same
as or has been covered by any previous information received, then the new information may
be clubbed with the previous information.
(2) Where on receipt of a reference from the Central Government or a State Government or a
statutory authority or information received under section 19,