The Competition Commission of India (CCI) is on the verge of concluding its long-running investigation into the alleged anti-competitive practices of e-commerce giants Amazon and Flipkart. As the case enters its final leg, the CCI has demanded financial statements from both companies, a crucial step in determining potential penalties.
These financial statements will serve as the basis for calculating any penalties, which could be substantial. A 2023 amendment to India’s competition law empowers the CCI to impose fines of up to 10% of an entity’s global turnover for anti-competitive conduct.
The CCI’s investigation, initiated in 2019 based on complaints from a trade association, has centered on allegations that Amazon and Flipkart engage in practices that disadvantage smaller sellers. The investigation has focused on issues such as preferential treatment given to certain sellers, exclusive product launches, and deep discounting, all of which can significantly impact the ability of smaller businesses to compete effectively.
In August, the CCI’s Director General of Investigation (DG) confirmed alleged violations of competition law by the two e-commerce platforms. The CCI has already shared non-confidential versions of the DG’s findings with Amazon and Flipkart and is now in the process of providing the confidential versions, allowing them to prepare their defense.
While neither Amazon nor Flipkart has commented officially on the leaked findings, experts have expressed concerns about the potential impact of these practices on the Indian e-commerce ecosystem.
Prakhar Mithal, an advocate at Kings & Alliance Llp, highlights the concern that preferential treatment for select sellers can disrupt the competitive balance, harming smaller businesses and limiting consumer choice. He emphasizes the challenges smaller brands face in gaining visibility when private labels of e-commerce platforms consistently appear at the top of search results.
Manmeet Kaur, a partner at Karanjawala & Co., stresses the importance of transparency and fair competition for sustainable growth in the Indian e-commerce market. She emphasizes the need for legal frameworks to be applied uniformly and transparently, ensuring equitable competition between e-commerce platforms and traditional retail outlets. Kaur also advocates for regulatory measures that prioritize consumer welfare by guaranteeing fair pricing, product accessibility, and robust data protection. Initiatives like the Online Network for Digital Commerce (ONDC) are seen as instrumental in empowering small businesses and enabling them to compete effectively against larger entities.
Mithal draws parallels with the European Union’s ex-ante regulations for the digital economy, suggesting that a proactive regulatory framework is needed in India to prevent platforms from abusing their algorithms to favor certain sellers. He argues that all sellers should have a fair chance of being listed prominently based on factors like quality, price, and customer satisfaction, not just based on partnerships with the platform.
The CCI’s investigation is a significant development for India’s digital economy. The outcome will have a profound impact on the competitive landscape of e-commerce in India and could influence future regulations in the sector. The CCI’s decision, expected soon, will determine whether the e-commerce giants will be held accountable for their alleged anti-competitive practices.
