Karnataka HC grants interim stay on CCI probe against Amazon, Flipkart

This comes after Amazon filed a petition last week seeking to quash or set aside the CCI order which directed for a probe into the practices of e-commerce players.
Karnataka HC grants interim stay on CCI probe against Amazon, Flipkart
Karnataka HC grants interim stay on CCI probe against Amazon, Flipkart
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In a relief to e-commerce major Amazon, the Karnataka High Court granted an interim stay on the probe ordered by Competition Commission of India into the practices of e-commerce players over allegations of deep discounting and predatory pricing.

CCI has given the parties two months’ time to respond and has put a stay on CCI’s probe until then.

The stay was reportedly granted on the grounds that with ED already initiating an investigation into Flipkart and Amazon’s activities over FDI violation, ED would have to give its report before the CCI could proceed with the matter.

The court also observed that CCI should have called Amazon and Flipkart for comments before passing the probe order, noting that it had in the past asked for comments from Amazon in the complaint filed by All India Online Vendors Association (AIOVA).

This comes after Amazon filed a petition last week with Karnataka HC seeking to quash or set aside the CCI order which directed for a probe, and an interim stay on the same till the court is hearing the matter. Amazon also made Flipkart a respondent in the petition, though Flipkart has not joined the petition.

The CCI probe was based on a complaint filed by the Delhi Vyapar Mahasangh that the two e-commerce majors were violating sections of the Competition Act of 2002. The Delhi Vyapar Mahasangh has also alleged that the two companies have several tie-ups with private labels which get more preference in terms of sales, especially in the smartphone category.

Amazon, represented by advocate Gopal Subramanian, argued that the probe was directed without factual backing. It also said that it should have been given an opportunity to be heard before a probe was ordered.

However, CCI in its counter argument said that such a right doesn’t exist, and therefore, Amazon cannot demand it and that not hearing Amazon’s grievances does not violate any principle of law. 

On Wednesday, Amazon also argued that a probe into Amazon and Flipkart was a violation of FDI policy and a violation of jurisdiction. To this, CCI’s counsel argued on Thursday that the FDI policy is a policy of the Central government and falls under the jurisdiction of the Central government. However, that pertains only to the source of funding they receive or ownership structure, both of which the CCI is not looking into. The area the CCI will be looking into, it stated, are the operations. 

Through its arguments, Amazon maintained that it didn’t have preferred sellers on the site and that the discounts offered on its site are between the sellers listed on Amazon and manufacturers themselves. It also referred to CCI’s 'Market Study on E-commerce in India' extensively. It said that in its petition that although the report was published prior to the order, the CCI order “fails to consider” the CCI’s own findings outlined in the study, which demonstrates its lack of awareness. 

Amazon said that such an investigation would hamper its reputation. “It is well settled that having regard to the publicity as well as the degree of irreparable harm which would be caused to the petitioner not only in India but the world over by referring to an antitrust inquiry in the Indian jurisdiction when no grounds exist, would create serious civil consequences,” Amazon stated in its petition. 

Advocate KG Raghavan, who appeared for the Delhi Vyapar Mahasangh, argued that the issues of other supposed violations can be looked into by the respective regulatory bodies. 

On Friday, the HC also heard the Conferderation of All India Traders (CAIT), which impleaded in the case also supported CCI’s argument on jurisdiction and that if CCI internally directed the director general to investigate a matter, and if that order is administrative, section 226 (on jurisdiction) wont be applicable.

CAIT’s counsel also said in his argument that there seems to be some understanding between Amazon and Flipkart and that CCI must investigate the cartelisation.

Both CAIT and Delhi Vyapar Mahasangh have said that they will file an appeal against the stay and are currently consulting their respective lawyers. CAIT said that meanwhile, it will push with the central government to speed up the ED investigation.

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