Amazon, Flipkart Gain Upper-hand For Time Being; Karnataka High Court Stays CCI Probe

Amazon, Flipkart Gain Upper-hand For Time Being; Karnataka High Court Stays CCI Probe 1

Bengaluru, NFAPost News Service: In a sigh of relief for global ecommerce player Amazon and home grown Flipkart along with those who want to purchase via ecommerce platfrom, Karnataka High Court on Friday put stayed he Competition Commission of India’s (CCI) Probe  into the alleged violation of anti competitive behaviour by major ecommerce for a period of eight weeks.

Even though the order gives reprieve for ecommerce players Amazon and its rival Flipkart, analysts are looking at how government is positioning its policy initiaitves, especially Commerce Ministry Piyush Goyal and Prime Minister play their cards.

The Karnataka High Court decision comes after CCI had ordered the probe into Amazon and Flipkart on January 13 after receiving complaints from traders body Delhi Vyapar Mahasangh and Confederation of All India Traders (CAIT), apex body of trading community of the Country.

When contacted by NFAPost to comment on the Karnataka High Court decision to put stay on CCI probe, Amazon India spokesperson said the company is confident about its compliance.

“While we welcome and respect the decision of the Hon’ble High Court of Karnataka, this is just a step in the legal process,” said an Amazon spokesperson.

Amazon argued in front of the court that the evidence furnished by the court was not prima facie which is a requirement for the commission to launch an investigation on its under Section 26(1) of the Competition Act. When contacted by NFAPost, Flipkart official did not respond to the query.

According to legal experts, the Karnataka High Court has stayed the order for investigation passed by the CCI on the ground that the Enforcement Directorate has already initiated investigation into Flipkart and Amazon’s activities that are alleged to be in contravention of the FDI policy.

“Now the Karnataka High Court has the opinion that FDI violations being in the realm of the Enforcement Directorate and the Adjudicating Authority under the FEMA, the case of CCI v. Bharti Airtel would apply to the case and Enforce Directorate would have to give it’s report before the CCI could proceed with the matter,” states a legal expert.

The Karnataka High Court also noted that while the CCI had asked Amazon for it’s comments in a previous case (filed by AIOVA), CCI should have also called the parties in the present matter when they were made respondents before passing the impugned order.

Indian ecommerce is registering exponential growth as the two major players and a dozen of Indian players are working hard to get their share. Flipkart and Amazon are the major players as they gained upper hand with their early bird advantage and systematic massive investment for infrastructure building.

The Indian e-commerce market is expected to grow to $ 200 billion by 2026 from $ 38.5 billion as of 2017. Much growth of the industry has been triggered by increasing internet and smartphone penetration. The ongoing digital transformation in the country is expected to increase India’s total internet user base to 829 million by 2021 from 636.73 million in FY19. ndia’s ecommerce revenue is expected to jump from $ 39 billion in 2017 to $ 120 billion in 2020, growing at an annual rate of 51%, the highest in the world.

NFAPost had reported the High Court proceedings. Senior Counsel Harish Narasappa appearing for CCI strongly objected the jurisdiction point raised by Amazon and said that Writ Petition filed under Article 226 of the Indian Constitution does not intervene in the investigations of the CCI Director General under order of CCI.

He further said that this policy is made by Central Government and read out the Consolidated FDI Policy 2017 in the Court and referred to point 3.7 and 3.7.1 of the policy which states that merely satisfying FDI does not exempt from other laws of land and FDI policy reflects only sources of inflow of money into the country. The impugned order of CCI does not question the FDI policy, it is only concerned with practices carried on by the Petitioners Amazon.

Commerce and Industry Minister Piyush Goyal also made earlier a lambasting comment at ecommerce giant Amazon stating the company was not doing any favour to India by announcing  $1 billion investment in the country as they are financing their losses,.
He also had stated that neither the Competition Commission of India (CCI) nor his Commerce and Industry would have to probe on fair trade practices if ecommerce players can stick within the letter and spirit of the law.

The government allowed foreign direct investment (FDI) in e-commerce for marketplace model, in which a firm is supposed to work as an agnostic platform by providing buyers and sellers, an opportunity to transact on that platform, stated Commerce and Industry Minister Piyush Goyal .

He also said that the ecommerce policy very categorically has allowed only business-to-business transaction, so online retailers were never expected to be a let’s say a hidden way or a surreptitious way to enter multi-brand retailing.

AIT and Delhi Vyapar Mahasangh stand

In a related development, both CAIT and Delhi Vyapar Mahasangh has decided to file an appeal against the order of the High Court very soon and both are consulting their respective lawyers.

CAIT National Secretary General Praveen Khandelwal termed unfortunate and unexpected the Interim stay granted to Amazon by the Karnataka High Court against CCI investigations into anti- competitive practices by Amazon and Flipkart.

“Lawyers of Amazon tried their best to misdirect the Court by creating a confusion between ED investigation and CCI investigation. The only motive they had was to somehow stop the CCI investigation fearing exposure of their unethical business practices which would have become evident to the entire nation had the CCI probe been completed. However, the Hon’ble Court did acknowledge that the Enforcement Directorate should continue it’s probe against these companies for FDI Violations. The CAIT will now push the Government to expedite the ED probe to expose the malpractices of these companies and will also file an appeal very soon in the matter,” said Praveen Khandelwal.

Praveen Khandelwal reiterated that if Amazon is doing honest business and not indulging in any violation or unethical practice it was their moral responsibility as a Global entity and one of the world’s biggest corporates to face the investigation and come clean.

“By shying away from CCI investigation, Amazon has infact created more doubts in the minds of everyone including it’s employees, stakeholders, authorities and the consumers that why such a big organisation feared an investigation and did everything possible to run away from facing the probe,” said Praveen Khandelwal.

Meanwhile, the CAIT will push with the Union Government to speed up the Enforcement Directorate investigation. In this context a CAIT delegation will soon meet Commerce Minister Shri Piyush Goyal and Finance Minister Smt. Nirmala Sitharaman.

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