Karnataka High Court stays CCI order against Amazon, Flipkart

‘Centre probing FEMA violation charge against e-com giants’

In a relief to e-commerce majors Amazon and Flipkart, the Karnataka High Court on Friday stayed the Competition Commission of India’s order directing an investigation through its Director General into whether they had entered into anti-competitive agreements in violation of the provisions of the Competition Act 2002.

Justice P.S. Dinesh Kumar passed the interim order while admitting a petition filed by Amazon Seller Services Pvt. Ltd., and stayed the January 13 order of the CCI. The CCI had ordered the probe on a complaint by Delhi Vyapar Mahasangh (DVM), which had alleged that Amazon and Flipkart were giving preference to select sellers and offering deep discounts by indulging in anti-competitive agreements.

The High Court passed the interim order after noticing that the central government, on a petition filed by Telecom Watchdog (an NGO) in March 2019, had told the Delhi High Court that an investigation under the provisions of the Foreign Exchange Management Act (FEMA), 1999, was initiated against Amazon and Flipkart to ascertain whether they were contravening any provisions or rule, regulations, notification, direction or order issued in exercise of the powers under FEMA, or contravening any condition subject to which an authorisation was issued by the Reserve Bank of India, etc., and that an investigation was in progress.

Noting that the Foreign Direct Investment policy prohibits an investor from indulging in deep discounts, giving preference to sellers, etc., on online marketplace, and that the Centre had initiated a probe under FEMA to ascertain whether allegation of violation of conditions are true, the court said the complaint by DVM before too are on same issue.

The CCI, the court said, had not properly deliberated the issues to come to a conclusion that there exists a case to conduct an investigation as the CCI had concluded there was possibility of an exclusive partnership between smartphone makers and e-commerce platforms though the agreements cited in the complaint were between the online platforms and the sellers.

The court also observed that the DVM’s complaint had contained an earlier order — passed by the CCI on a complaint of anti-competitive practice made against Flipkart by the All India Online Vendors Association (AIOVA) — in which the CCI gave a decision that was in favour of Flipkart and Amazon, though the latter was not a party, but was invited by the CCI to give details of its business practices. However, in the present case, the CCI did not discuss its order in the AVIOVA case, the court said.

The court, while relying on the apex court’s verdicts, did not accept the arguments — canvassed on behalf of the DVM, the Confederation of All India Traders and the CCI — that the writ petition is not maintainable.

The Flipkart Internet Pvt. Ltd. has supported Amazon’s contentions though it has not filed a separate petition.