A Bench headed by Chief Justice of India N V Ramana and also comprising Justices Vineet Saran and Surya Kant dismissed petitions by the companies asking that the investigation be quashed. “… We see no reason to interfere with the impugned orders passed by the High Court of Karnataka dismissing the Writ Appeals of the petitioners,” the top court said in its order. Earlier, the High Court had declined to interfere with the preliminary enquiry ordered by the Competition Commission of India (CCI) into the alleged anti-competitive practices of the two companies.
Last year, CCI had ordered an investigation based on allegations by the trade body Delhi Vyapar Mahasangh that Amazon and Flipkart had entered into exclusive sales agreements with smartphone makers to sell certain phones through a small number of preferred sellers.
The Mahasangh also alleged that Amazon and Flipkart had given preferential treatment to certain sellers by giving them higher search rankings, and offering to pay for part of the discount that such sellers would offer during key sales periods such as Flipkart’s Big Billion Days and Amazon’s Prime Day.
The CCI noted that arrangements between smartphone brands and online platforms leading to a few sellers selling certain phones exclusively on a single platform, coupled with alleged links between the platforms and these sellers, merited an investigation.
(Incidentally, Amazon India announced on Monday that it was ending its participation in the joint venture Prione Business Services, which owns one such preferred seller — Cloudtail India Pvt Ltd — that has, according to the Mahasangh, benefitted from preferential treatment by Amazon.)
Amazon and Flipkart approached the Karnataka High Court with a plea to quash the CCI order on the ground that there were no agreements between the platforms and the sellers that could be shown to have the potential to negatively impact competition. They also argued that CCI had not formed a prima facie opinion on such potential impact while passing the order. And it was the manufacturer’s choice to sell a smartphone exclusively on a platform, they said.
The High Court concluded that the orders by the CCI initiating an investigation were administrative directions, and that the commission was not bound to enter an adjudicatory process or form an opinion before ordering an investigation.
The CCI Director General will complete the probe and submit the findings to the commission. which will pass final orders.
CCI chairman Ashok Kumar Gupta had told The Indian Express in an interview recently that “opacity in platform rankings” had become a cause for concern, and that sellers’ increasing dependence on online platforms meant that certain platforms were becoming essential facilities, and were required to treat sellers in an unbiased manner.
“Prima facie we have also seen that the ecosystem of exclusive agreements, deep discounting, and preferred sellers put together by online platforms commanding market power, are also raising competition concerns,” Gupta had said.