The Director General of Competition Commission of India (CCI) is set to probe e-commerce portals, Amazon and Flipkart over allegations of deep discounting, preferential listing and preferential treatment to certain sellers among others.
On January 13, the market watchdog ordered the probe after a complaint was filed by Delhi Vyapar Sangh, whose members comprise numerous Micro, Small and Medium Enterprises (MSME) traders which rely on trade of smartphones and related accessories.
The complaint alleged that the two online platforms provide deep discounts to a select few preferred sellers on its platform adversely impacting non-preferred sellers and they have established an inherently anti-competitive model for e-commerce.
“It needs to be investigated whether the alleged exclusive arrangements, deep-discounting and preferential listing by the online platforms are being used as an exclusionary tactic to foreclose competition and are resulting in an appreciable adverse effect on competition contravening the provisions of Section 3 (1) read with Section 3(4) of the Act,” the commission observed.
Section 3 (1) of the Competition (Amendment) Act, 2007 states that “no enterprise or association of enterprises or person or association of persons shall enter into any agreement in respect of production, supply,distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India.” Section 3(4) prohibits enterprises from abusing their dominant position.
CCI has directed the director general to complete the investigation within 60 days. The commission will also probe the legality of the exclusive launch of smartphones by mobile manufacturers on these two platforms.
“Exclusive launch coupled with preferential treatment to a few sellers and the discounting practices create an ecosystem that may lead to an appreciable adverse effect on competition,” noted the order.
The complaint claimed that Amazon and Flipkart had 36% and 53% market share, respectively, in the market in India during the first quarter of 2019.
According to the National Association of Software and Services Companies (Nasscom) estimations, the Indian e-commerce market reached $38.5 billion during 2018-19 from $33 billion in 2017-18.