Amazon-Flipkart Plea: Kar HC dismisses prayer that sought to restrain CCI from investigating into deep discounting practices and biased treatment of select sellers

Karnataka High Court: P. S. Dinesh Kumar, J., dismissed the petitions and did not interfere with the impugned order.

The facts of the case are such that Delhi Vyapar Mahasangh (Respondent 2) is a Society comprising of Micro, Small and Medium Enterprises which filed information alleging contravention of Section 3(1) read with Section 3(4) and Section 4(1) and 4(2) of the Competition Act by Amazon and Flipkart directing an investigation under Section 26(1) of the Competition Act, 2002. It is alleged by the informant that petitioners entered into vertical agreements with ‘preferred sellers’ which led to foreclosure of ‘non-preferred sellers’ from the Online Market places and the complexity involving the parameters of ‘inter platform’, ‘intra-platform’ and ‘inter-channel distribution’. Commission has recorded the existence of preferred sellers, preferential listing etc., in the impugned order. The instant petitions are filed assailing the impugned order of investigation by the Competition Commission of India.

Both the petitioners and the Commission relied on judgment CCI v. SAIL, (2010)10 SCC 744 wherein it was observed

“38. In contradistinction, the direction under Section 26(1) after formation of a prima facie opinion is a direction simpliciter to cause an investigation into the matter. Issuance of such a direction, at the face of it, is an administrative direction to one of its own wings departmentally and is without entering upon any adjudicatory process. It does not effectively determine any right or obligation of the parties to the lis.”

  1. Section 26(1), as already noticed, requires the Commission to form an opinion whether or not there exists a prima facie case for issuance of direction to the Director General to conduct an investigation. This section does not mention about issuance of any notice to any party before or at the time of formation of an opinion by the Commission on the basis of a reference or information received by it.” Language of Sections 3(4) and 19 and for that matter, any other provision of the Act does not suggest that notice to the informant or any other person is required to be issued at this stage. In contradistinction to this, when the Commission receives the report from the Director General and if it has not already taken a decision to close the case under Section 26(2), the Commission is not only expected to forward the copy of the report, issue notice, invite objections or suggestions from the informant, the Central Government, the State Government, statutory authorities or the parties concerned, but also to provide an opportunity of hearing to the parties before arriving at any final conclusion under Sections 26(7) or 26(8) of the Act, as the case may be. This obviously means that wherever the legislature has intended that notice is to be served upon the other party, it has specifically so stated and we see no compelling reason to read into the provisions of Section 26(1) the requirement of notice, when it is conspicuous by its very absence.\\

 The Court also relied on CCI v, Bharathi Airtel, (2019)2 SCC 521 wherein it was observed:

 Even if it is a direction under any of the provisions and not a decision, conclusion or order passed on merits by the Commission, it is expected that the same would be supported by some reasoning. At the stage of forming a prima facie view, as required under Section 26(1) of the Act, the Commission may not really record detailed reasons, but must express its mind in no uncertain terms that it is of the view that prima facie case exists, requiring issuance of direction for investigation to the Director General.

In other words, the Commission is expected to express prima facie view in terms of Section 26(1) of the Act, without entering into any adjudicatory or determinative process and by recording minimum reasons substantiating the formation of such opinion, while all its other orders and decisions should be well reasoned.

The Court thus observed that an order under Section 26(1) of the Act passed by the Commission is an ‘administrative direction’ to one of its wings departmentally and without entering upon any adjudicatory process and Section 26(1) of the Act does not mention about issuance of any notice to any party before or at the time of formation of an opinion by the Commission on the basis of information received by it.

The Court observed that perusal of the impugned order shows that the Commission has analyzed the information under various heads such as exclusive launch of mobile phones, preferred sellers on the market places, deep discounting, and preferential listing of private labels. It has recorded that mobile manufacturing Companies like One plus, Oppo and Samsung have exclusively launched several of their models on Amazon and Vivo, Realme, Xiaomi etc., have exclusively launched several of their models on Flipkart. Commission has noticed that Flipkart has launched 67 mobile phones and Amazon has launched 45 mobile phones exclusively on their platforms. Commission has recorded that petitioners have their own set of preferred sellers and there are only few online sellers which sell the exclusively launched smart phones. Commission has prima facie inferred that there appears to be exclusive partnership between smart phone manufacturers and e-Commerce platforms for exclusive launch of smart phones. It was further recorded that certain smart phone brands/models are available at significantly discounted price on petitioners’ platforms and are sold largely through the sellers identified by informant as ‘preferred sellers’.

The Court further stated that the informant has filed information and appended material papers, which according to the informant support its allegations. It was submitted that the Commission has also called upon the informant to file a Certificate under Section 65B of the Indian Evidence Act and the penalty for incorrect information is upto Rs. One Crore under Section 44 of the Competition Act. 

The Court observed that it is expected that an order directing investigation be supported by ‘some reasoning’ which the Commission has fulfilled and thus held that it would be unwise to prejudge the issues raised by the petitioners in these writ petitions at this stage and scuttle the investigation.[Amazon Seller Services (P) Ltd. v. Competition Commission of India, Writ Petition No.3363 OF 2020, decided on 11-05-2021]


Arunima Bose, Editorial Assistant has reported this brief.

Join the discussion

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.