India’s top court deals a blow to Amazon, Walmart-owned Flipkart

The court ruled the two firms must face investigations by India’s competition regulator for certain business practices.

India's online retail market is expected to hit $200bn by 2026 [File: Elijah Nouvelage/Bloomberg] Inc and Walmart’s Flipkart must face antitrust investigations ordered against them in India, the country’s Supreme Court ruled on Monday, in a blow to the leading e-commerce giants which had urged judges to quash the inquiries.

The Competition Commission of India (CCI) ordered the investigation against the companies last year for allegedly promoting select sellers on their e-commerce platforms and using business practices that stifle competition.

The companies deny any wrongdoing and mounted legal challenges in lower courts and at the Supreme Court against the investigation, saying the CCI did not have enough evidence to pursue the matter.

A three-judge Supreme Court bench, led by Chief Justice N V Ramana, said companies like Amazon and Flipkart should volunteer for such investigations.

“We expect organisations like Amazon and Flipkart, big organisations, they have to volunteer for inquiry and transparency. We expect that and you don’t even want (an) inquiry,” Justice Ramana told the court.

“You have to submit and an inquiry has to be conducted.”

Amazon and Flipkart, leading players in an e-retail market India forecasts will be worth $200bn by 2026, did not immediately respond to requests for comment.

The decision is a major setback for both companies as the Supreme Court appeal was seen as the last legal recourse to block the CCI pressing on with its investigation.

‘Sensitive’ business information

In the current antitrust case, filed by trader group Delhi Vyapar Mahasangh, the two companies face allegations of exclusive launches of mobile phones, promotion of select sellers on their websites and deep discounting practices that drive out competition.

Amazon and Flipkart had also asked the Supreme Court to put on hold the CCI’s recent request for information in which they were asked 32 questions – including details of top 100 sellers and top-selling products. The companies argue such queries relate to “sensitive” business information.

Justice Ramana said on Monday the companies would have four more weeks to answer those queries.

In February, a Reuters investigation based on Amazon documents showed it had given preferential treatment for years to a small group of sellers. The CCI has said the Reuters story corroborated evidence it had received against the company. Amazon has denied any wrongdoing.

The companies are also grappling with the prospect of tougher e-commerce regulations and investigations by the country’s financial-crime agency for alleged violation of foreign investment laws.

In another legal challenge, the Supreme Court last week handed Amazon a victory by blocking its partner Future Group from selling $3.4bn in retail assets to rival Reliance Industries.

However, CCI has accused Amazon of concealing facts when it sought approval for the 2019 deal with the Future unit that sparked the legal dispute, Reuters has reported. Amazon has said it is confident of addressing those concerns.

Source: Reuters