Amazon Seller Services Private Limited Vs Competition Commission of India (Karnataka High Court)
Conclusion: Competition Commission of India had allowed to investigate against Flipkart and Amazon for alleged involvement in Anti-competitive Agreements. An order directing investigation be supported by ‘some reasoning’ (CCI Vs. SAIL para 97), which the Commission had fulfilled. Therefore, it would be unwise to prejudge the issues raised by Amazon and Flipkart in these writ petitions at this stage and scuttle the investigation.
Held: Amazon and Flipkart had averred that they were private limited Companies. They operated ‘Online Market Places’ on which, products listed for sale, were owned and sold by third parties. Delhi Vyapar Mahasangh(the informant) was a Society comprising of Micro, Small and Medium Enterprises registered under the Societies Registration Act, 1860. It had filed information alleging contravention of Section 3(1) read with Section 3(4) and Section 4(1) and 4(2) of the Competition Act and sought directions for investigation under Section 26(1) of the Competition Act. The informant had alleged that Amazon and Flipkart had entered into several vertical agreements with preferred sellers and following aspects require investigation and consideration by the Commission: Deep discounting-Amazon and Flipkart had several preferred sellers which provide incentives to its preferred sellers to sell their products at ‘predatory prices’ throughout the year to the detriment of non-preferred sellers, who were not compensated for the amount of loss which they would incur to keep competing in the market; Preferential Listing- Amazon and Flipkart perpetuated the practice of listing its preferred sellers in the first few pages of the search results, thereby creating a search bias and Exclusive Tie-ups – It was alleged that Flipkart and Amazon herein had several exclusive tie-ups and private labels, which get more preference in terms of sales. Therefore, the issue arose for consideration was what was the nature of the impugned order passed under Section 26(1) of the Act; whether a prior notice and opportunity of hearing was mandatory at the stage of issuing direction to the Director General to hold inquiry under Section 26(1) of the Act and whether impugned order called for interference? It was held that in substance, informant’s case was, though Amazon and Flipkart claimed that ‘any person’ could sell his product in their market place, in fact, assessee’s promote only selected few and did not maintain platform neutrality, an order under Section 26(1) passed by the Commission was an ‘administrative direction’ to one of its wings departmentally and without entering upon any adjudicatory process; and section 26(1) of the Act did not mention about issuance of any notice to any party before or at the time of formation of an opinion by the Commission on the basis of information received by it. In the case on hand, the informant had filed information and appended material papers, which according to the informant supported its allegations. It was submitted by Additional Solicitor General that the Commission had also called upon the informant to file a Certificate under Section 65B of the Indian Evidence Act and the penalty for incorrect information was upto Rs. One Crore under Section 44 of the Competition Act. It was expected that an order directing investigation be supported by ‘some reasoning’ (CCI Vs. SAIL para 97), which the Commission had fulfilled. Therefore, it would be unwise to prejudge the issues raised b y Amazon and Flipkart in these writ petitions at this stage and scuttle the investigation. Therefore, the impugned order did not call for any interference.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
Amazon Seller Services Pvt. Ltd.1, and Flipkart Internet Pvt. Ltd.2, have filed these writ petitions with prayers inter alia to quash order dated January 13, 2020 passed by the Competition Commission of India3, in Case No.40/2019, directing an investigation under Section 26(1) of the Competition Act, 2002 (‘Act’ for short) by the Director General4.
Facts of the case:
2. Amazon and Flipkart have averred that they are private limited Companies. They operate ‘Online Market Places’ on which, products listed for sale, are owned and sold by third parties.
3. Amazon has pleaded that it also provides certain support services to third party sellers to facilitate sale of goods. Those services are integral and non-separable from retail trade and include warehousing, packing, shipment, delivery/return of products centralized payment processing, refund etc.
4. Delhi Vyapar Mahasangh (respondent No.2) is a Society comprising of Micro, Small and Medium Enterprises registered under the Societies Registration Act, 1860. It has filed information alleging contravention of Section 3(1) read with Section 3(4) and Section 4(1) and 4(2) of the Competition Act and sought directions for investigation under Section 26(1) of the Competition Act. Upon consideration of the said information, Commission has passed the impugned order.
5. The main grounds urged on behalf of petitioners are:
(a) The impugned order is ultra vires the object and purpose of Competition Act;
(b) The impugned order suffers from non-application of mind;
(c) Delhi Vyapar Mahasangh, the informant has acted on behalf of Confederation of All India Traders5 which has initiated multiple proceedings against petitioners, but failed to obtain any order;
(d) The impugned order cannot be improved by additional justification in the Statement of objections by the Commission;
(e) Commission has deviated from its own earlier practice;
(f) Petitioners are not provided with any notice. On earlier occasions, while dealing with similar allegations, the Commission had provided opportunity of hearing before forming a prima facie
(g) The impugned order is not a reasoned order as there is no analysis with regard to Appreciable Adverse Effect on Competition6;
(h) The Commission has not formed any prima facie opinion with regard to contravention of any provision.
(i) The jurisdiction of CCI is barred on account of pending investigation by the Enforcement Directorate; and
(j) The impugned order is abuse of process of law and would cause grave hardship to the petitioners.
6. Amplifying the grounds urged in support of writ petitions, Shri. Gopal Subramanium, learned Senior Advocate has submitted that:
