The Competition Commission of India (CCI) has ordered a probe of e-commerce players Amazon and Flipkart over alleged malpractices of deep discounting, having preferred sellers on the marketplace, preferential listing and promotion of private labels, and exclusive launch deals of mobile phones.
It has ordered the director general to complete the investigation and submit the investigation report within 60 days.
This comes after the Delhi Vyapar Mahasangh approached the CCI alleging that Amazon and Flipkart were violating the Competition Act, 2002.
The Delhi Vyapar Mahasangh has alleged that Amazon and Flipkart show preference to certain sellers affiliated with or controlled by them, which has led to several other traders and sellers having to shut shop.
It has alleged that these platforms, therefore, are able to influence prices by providing several discounts as well as inventory to preferred sellers, which violates Section 3 (1) of the Competition Act, 2002.
It has also alleged that these marketplaces gather data on consumer preference and use them to their advantage.
“The Informant (Delhi Vyapar Mahasangh) alleged that there is evidence in the form of communications from Flipkart to its sellers stating that it would incur a part of the cost during the Big Billion Days (BBD) sales or Diwali sales etc. However, no such opportunity is available to other sellers who are, thus, unable to compete with such preferred sellers,” CCI noted in its order.
On giving preferential listing to certain sellers, it has been alleged that using the words “Assured Seller” (Flipkart) and “Fulfilled (by Amazon), these marketplaces create search biases where its preferred sellers are listed in the first few pages of the search results, while the products with the same ratings sold by non-preferred sellers are listed on later pages.
The Delhi Vyapar Mahasangh has also alleged that Amazon and Flipkart have several tie-ups with private labels which get more preference in terms of sales, especially in the smartphone category.
“This leads to other competitors being excluded and foreclosed from the market. It is stated that any benefit to the consumers is only apparent at the initial stage till critical mass of network effects is reached or competitors are eliminated. This arrangement has far-reaching consequences on the economy as the non-preferred sellers are relegated to sell only through traditional brick and mortar set-up which involves significant fixed costs and are devoid of wide pan-India reach which online marketplaces offer,” CCI noted.
Taking into account all allegations, CCI observed that the exclusive arrangements between smartphone /mobile phone brands and e-commerce platforms giving preference to select sellers, coupled with the allegation of linkages between these preferred sellers and Flipkart and Amazon alleged by the Informant, merits an investigation.
CCI has said that it needs to be investigated “whether the alleged exclusive arrangements, deep-discounting and preferential listing by Flipkart and Amazon are being used as an exclusionary tactic to foreclose competition and are resulting in an appreciable adverse effect on competition contravening the provisions of Section 3 (1) read with Section 3(4) of the Act.”
Meanwhile, Flipkart said in a statement, “We are currently reviewing the document. The Flipkart group is fully compliant with all applicable laws and FDI regulations. We take pride in democratising e-commerce in India and giving market access to lakhs of MSMEs, sellers, artisans and small businesses, making quality and affordable goods available to consumers through our transparent and efficient marketplace while creating lakhs of jobs.”