Karnataka High Court Dismisses Appeals By Flipkart And Amazon To Halt CCI Probe

A division bench of the Karnataka High Court has dismissed the request by e-commerce giants Flipkart and Amazon India to suspend an investigation by the country's competition watchdog on 23 July.

The bench dismissed their petitions calling it “devoid of any merits and substance” and said that the e-commerce companies shouldn't be afraid of the investigation if they have not broken any antitrust rules.

The bench, comprising Justice Satish Chandra Sharma and Justice Nataraj Rangaswamy, issued the judgement after Walmart-owned Flipkart and Amazon India appealed to the court to overturn a previous ruling that had allowed the Competition Commission of India (CCI) to investigate both the companies.

However, these online marketplaces filed separate appeals, but the division bench combined them and heard them together.

As reported earlier, Flipkart said in its court filing that in the Indian antitrust investigation, the e-commerce firm should not be treated the same as rival Amazon since the evidence against the two companies is "qualitatively different".

The company stated that CCI and the court "confused the facts" in the case of Amazon and Flipkart, failing to recognise that they were "fierce competitors".

However, according to Economic Times, following the latest court order, people familiar with the matter said that both Flipkart and Amazon India are now likely to approach the Supreme Court (SC) to challenge the ruling.

One of the sources said: “It is safe to think the matter will now get challenged in the Supreme Court.”

Meanwhile, an Amazon India representative stated that the e-commerce giant “respects the judgement passed by the honourable high court”, but the company will review the ruling in detail to determine the next steps. According to Flipkart, it will also review the order as soon as it gets a copy of the court’s judgment.

A spokesperson for Flipkart said: “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.”

In January 2020, CCI had launched an investigation into the two e-commerce marketplaces, after trade groups such as the Confederation of All India Traders (CAIT) and the Delhi Vyapar Mahasangh (DVM) claimed that Amazon India and Flipkart were offering predatory discounts to customers as well as favourable terms to certain merchants.

In response, both e-tailers appealed to the Karnataka High Court, which then granted an interim stay into the investigation in February 2020. In October, CCI filed an appeal in the Supreme Court, but the case was remanded to the high court.

The CCI argued in the high court that the investigation should be allowed to continue and that a probe did not imply that the companies had already been found guilty.

Meanwhile, the e-commerce majors maintained that the CCI lacked sufficient prima facie evidence to launch an investigation. Additionally, Flipkart and Amazon told the court that CCI should have consulted the companies and allowed them to present their positions before launching an investigation.

An order under Section 26(1) is based on prima facie evidence and the legislation does not need a hearing before it is issued, said competition law experts, reported Economic Times.

Amazon called CCI's action “perverse, arbitrary and untenable in law”. The company also said that allowing the regulator to undertake the investigation would be an abuse of power.

In response, CCI told the court last year that Amazon’s arguments were "mischievous".

However, aside from allegations of excessive discounting, small online and offline sellers also complained about e-commerce giants giving certain suppliers preferential treatment.

Cloudtail and Appario Retail, two of Amazon India's most popular merchants, are among these sellers.