Amazon and Flipkart found violating Competition law in India-DG investigation report out
NCLAT directs investigation into alleged abuse of dominant position by Flipkart -Quashes earlier CCI order closing the case
By a recent judgment dated 04.03.2020, the Hon’ble National Company Appellate Tribunal (“NCLAT”) has set aside the order dated 06.11.2018 passed by the Competition Commission of India (“CCI”) dismissing allegations of Abuse of Dominant Position by Flipkart India Pvt. Ltd and Flipkart Internet Pvt. Ltd.
The information before the CCI was filed by All India Online Vendors Association (“AIOVA/informant”) which is a group of more than 2000 sellers selling on e-commerce marketplace such as Flipkart, Amazon, and Snapdeal etc. The primary allegation was that Flipkart India sells goods to companies like WS Retail Services Private Limited (“WS Retail Service”), which was owned by the founders of Flipkart Internet Pvt Ltd.( FlipKart Internet) till 2012, at a discounted price and thereafter, these goods are sold on the platform operated by Flipkart Internet. As per the informant, this practice amounted to preferential treatment to certain sellers. In other words, the information revealed an alleged strategy of Flipkart India to acquire goods from various persons and to immediately sell them to WS Retail Services at a discount, which would, in turn, sell these goods as sellers on the internet platform Flipkart.com of Flipkart internet was anti-competitive and forecloses markets for online sale of the goods by members of AIOVA.
The CCI in its order held that Flipkart is not in a dominant position in the relevant market due to the presence of Amazon (its closest competitor having a valuation around $700 billion) and other competitors such as Paytm Mall, SnapDeal, and Shopclues etc. In addition, new entrants such as Paytm Mall revealed the low entry barriers in the relevant market and ,therefore , no case of abuse of dominant position was made out against FlipKart. AIOVA challenged this CCI order dated 6.11.2018 (prima facie order) in appeal before NCLAT.
Incidentally, AIOVA had referred to the decision in a case before the Income Tax Appellate Tribunal (ITAT) namely Flipkart India Pvt. Ltd v Assistant Commissioner of Income Tax (ITA No. 202/Bang/2018) before CCI which was ignored by CCI in its prima facie order .This decision was , however, noticed by NCLAT and played a major role in the NCLAT decision in the appeal filed .
The NCLAT noticed the observations of the Assessing Officer in the above-mentioned case under the Income Tax Act, 1961 , which revealed the manner in which Flipkart India Pvt. Ltd was operating in the market and resorting to predatory pricing and claimed the losses suffered on account of such predatory pricing as business expenditure and claimed credit for the same before the Assessing Officer . NCLAT observed that although the conclusion drawn to impose tax was set aside by the ITAT, however, the above observations of the Assessing Officer remained a crucial fact on record which do make out a prima facie case for predatory pricing against FlipKart which merits investigation by the DG under the Competition Act, 2002. The ITAT had observed that selling at a price below cost prices by Flipkart was not an irrational economic behavior but a clearly thought out strategy to establish a monopoly in market by brand building thereby generating consumer goodwill.
Accordingly, NCLAT being satisfied that there is a prima facie case which merits investigation, directed the CCI to direct the DG for investigation into the matter.
P.S.- As per recent Media news , AIOVA, anticipating that FlipKart or CCI may file appeal against the above order of NCLAT in the Supreme Court has filed Caveat Petition before the Supreme Court to avoid any ex parte stay order by the Apex Court.
#CCI #FlipKart #AbuseofDominnace #AIOVA
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