The Karnataka high court on Friday stayed the Competition Commission of India (CCI)’s investigation into alleged anti-competitive practices, including predatory pricing and preferential treatment of sellers, by Amazon India and Walmart-owned Flipkart.

The court granted eight weeks to the e-commerce majors to file their responses, and is expected to resume hearing thereafter, three people aware of the development said.

On February 10, Amazon had filed a writ petition before the HC against the CCI’s January decision to launch a probe following complaints that the e-commerce platforms had misused their dominant positions.

Delhi Vyapar Mahasangh (DVM), a group representing small- and medium-sized businesses, had approached the CCI alleging business malpractices by Amazon and Flipkart, which included preferential treatment to sellers affiliated with, or controlled by, the companies, predatory pricing, and exclusive arrangements with mobile phone brands.

The CCI, in its order, had observed that the exclusive arrangements between brands and e-commerce companies, and the allegations of preferential treatment to certain sellers warranted an investigation.

In its petition before the Karnataka high court, Amazon likened the CCI’s actions to an ‘open-ended fishing expedition’ and accused it of jurisdictional overreach. An advocate representing Amazon said that the company was compliant with foreign direct investment (FDI) laws and argued that it was being wrongly probed under the competition act by CCI.

The court observed that the CCI order does not meet the test of prima facie opinion being formed about the need for an investigation, advocates appearing in the case said.

The court order comes as a breather to Amazon and Flipkart amid intensifying scrutiny of e-commerce companies by Indian authorities. It is highly unusual for a CCI investigation to be thwarted even before it has been completed, experts said.

“A stay of an investigation initiated by the CCI is not normally granted unless there is an inherent question of jurisdiction, or there is a significant infirmity apparent on the face of the record,” said Abdullah Hussain, partner, L&L Partners. “(But) the high court has stayed the investigation only temporarily and the order of the CCI may yet be upheld in the final decision,” he added.

DVM, and its parent body, the Confederation of All India Traders (CAIT), said they will file an appeal against the HC order. It also said that its representatives will meet commerce minister Piyush Goyal and finance minister Nirmala Sitharaman and requesting them to initiate an Enforcement Directorate investigation against the two e-commerce firms.

On Thursday, Goyal said at a summit that e-commerce players should strictly adhere to foreign investment laws and that it “certainly does not look and feel and smell right” when a company makes a loss of ₹6,000 crore on a revenue of ₹5,000 crore. This was in reference to the huge losses reported by Flipkart and Amazon over the years. Goyal said the CCI or his ministry would not have to probe e-tailers if they adhered to “the letter and spirit of the law”.

Flipkart and Amazon control an overwhelming majority of India’s fast-growing e-commerce market, which stood at $30.8 billion in 2019, according to RedSeer Consulting.

Setting aside their rivalry, Flipkart and Amazon are ‘sailing together’ against the observations of the regulator.

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