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CCI orders probe against Amazon, Flipkart over discount practices

India's competition watchdog has ordered its investigative wing to probe Amazon and Flipkart over their discounting practices, exclusive brand launches on the platforms and the preferential treatment they have allegedly offered to certain mobile phones sellers.

ET Bureau|
Updated: Jan 14, 2020, 07.57 AM IST
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The complaint against the two companies was filed by Delhi Vyapar Mahasangh, a group representing small- and medium-sized businesses.
New Delhi: India's competition watchdog has ordered its investigative wing to probe Amazon and Flipkart over their discounting practices, exclusive brand launches on the platforms and the preferential treatment they have allegedly offered to certain mobile phones sellers.

In its order on Monday, the Competition Commission of India said it “is of the opinion that there exists a prima facie case which requires an investigation”. The antitrust body directed its director-general, who investigates such cases, to submit its report within 60 days. The order comes ahead of Amazon chief executive Jeff Bezos’ visit to India this week, during which he is likely to meet key policymakers including Prime Minister Narendra Modi. Amazon said it would work with the CCI to address the concerns. “We welcome the opportunity to address allegations made about Amazon; we are confident in our compliance, and will cooperate fully with CCI”, a spokesperson said.

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Walmart-owned Flipkart said it was reviewing the order and that the company was fully compliant with all applicable laws. CCI’s order follows a complaint filed by the Delhi Vyapar Mahasangh, a group representing brick and mortar small businesses. The group had alleged that some “preferred sellers” on the platforms were “in some way or other connected to Amazon and Flipkart through common investors, directors, shareholding, etc”. In the 11-page order, the CCI said allegations that both platforms had asked sellers to incur a part of the discounts offered during big sale events like Flipkart’s Big Billion Days and Amazon’s Great Indian Festival merited an investigation.

“It needs to be investigated whether the alleged exclusive arrangements, deep-discounting and preferential listing by the OPs (opposite parties) are being used as an exclusionary tactic to foreclose competition and are resulting in an appreciable adverse effect on competition,” the CCI said. The CCI noted that exclusive launches of select mobile phones, coupled with preferential treatment for some sellers and discounting practices of platforms, could create an ecosystem that might have an adverse effect on competition.

It observed that only a few online sellers were selling mobile phones launched exclusively on Amazon and Flipkart and that “it can be prima facie inferred that there appears to be exclusive partnership between smartphone manufacturers and ecommerce platforms for exclusive launch of smartphone brands”.

The CCI order noted that Flipkart exclusively launched 67 mobile phones and Amazon 45 mobile phones on their platforms in 2018. “Competition on the platforms may get influenced in favour of the exclusive brands and sellers, through higher discounts and preferential listing,” said the order, adding that allegations warranted a holistic investigation of vertical agreements and their effect on competition. The competition regulator, however, said it would not look into allegations of joint dominance against the companies, as the Competition Act "does not provide for inquiry into or investigation into the cases of joint/collective dominance."

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