The National Company Law Appellate Tribunal (NCLAT) directed the Competition Commission of India (CCI) to investigate the business practices of Flipkart for misuse of its dominant position.
A three-member bench, led by Justice SJ Mukhopadhyay, set aside a ruling given by the CCI and directed the probe.
AIOVA had alleged that Flipkart had abused its powers by way of Flipkart India Pvt Ltd and Flipkart Internet Pvt Limited — with Flipkart India being engaged in the wholesale trading/ distribution of books, mobiles, computers and related accessories, and Flipkart Internet being engaged in an e-commerce marketplace business.
The All India Online Vendors Association had approached the court in 2018 against Flipkart, and in 2019, the CCI gave the e-commerce giant a clean chit. In November 2018, CCI ruled on AIOVA’s complaint that Flipkart was abusing its dominant position in the market to favour certain sellers.
“...looking at the present market construct and structure of online marketplace platforms market in India, it does not appear that any one player in the market is commanding any dominant position at this stage of evolution of market,” CCI had then said in the matter. It was this that was appealed by AIOVA in the NCLAT.
AIOVA’s lawyer Chanakya Basa told TNM that a lot has happened since the time the CCI gave a clean chit to Flipkart and now.
In January 2020, the CCI came up with a ‘Market Study on E-Commerce’. "The CCI's report in the e-commerce study highlights issues of lack of platform neutrality, unfair platform-to-business contract terms, exclusive contracts between online marketplace platforms and sellers/service providers, platform price parity restrictions and deep discounts," he said. With the CCI now being directed to investigate Flipkart, the study is in AIOVA’s favour, he added.
“Now, the regulator has enough material before them, so this time we are positive. Things changed in 2019 compared to what they were in 2018," he added.
This comes after the Delhi Vyapar Mahasangh filed a complaint against Amazon and Flipkart over their business practices with the CCI, which ordered a probe into both companies. This was then first challenged by Amazon and then by Flipkart in the Karnataka High Court.
During the hearing for the investigation to be stayed, the AIOVA case had been extensively relied upon. “The very ground has become infructuous because the case where they have been given a clean chit has been set aside, and there will be massive ramifications of the same,” Chanakya said.
The Confederation of All India Traders (CAIT), which impleaded in the matter in the Karnataka High Court where Amazon and Flipkart sought a stay, said it welcomes the NCLAT order. “The NCLAT order is a big shot in the arm of CAIT which is spearheading a legal fight and other agitation against Amazon and Flipkart. This order is certainly going to impact the stay granted by the Karnataka High Court against an investigation into Amazon and Flipkart,” said Praveen Khandelwal, Secretary-General of CAIT.