Amazon's Legal Woes: A Timeline of CCI's Investigation and Court Battles

The Competition Commission of India (CCI) is considering penalising Amazon Seller Services Pvt. Ltd., for alleged anti-competitive practices. Before issuing a penalty to the company, the CCI will grant a final hearing to Amazon.

This is as per a Mint report. Confirming the charges, the Director General of Investigation (DG) also reportedly submitted a report to the commission. 

If a company breaches competition law, the commission can impose a penalty of up to 10 per cent of its global turnover. The commission may levy this penalty based on the average turnover or income of the violator over the last three financial years. 

Why is Amazon Under the Radar? 

Amazon has been under the radar of the government after a case was filed by Delhi Vyapar Mahasangh, a trade association, in 2020 where it alleged that the e-commerce platform preferred certain sellers over others. 

Further, a probe is being made into whether the company's alleged discounting practices affected the competition ecosystem as a whole. Along with Amazon, the probe is being conducted on e-commerce gaint Flipkart. 

Before understanding the timeline of the case, let’s look at what the competition law says about it. Under the Competition Act of 2002, anti-competitive agreements between parties involved in different stages of a value chain are prohibited.

Read: Amazon to Export $5 Billion Worth of Small-Ticket Items from India by 2024

While the dominant position of an enterprise is not prohibited under Section 3 of the Competition Act of 2002, it is forbidden if the enterprise abuses its dominance. 

“Abuse of dominant position impedes fair competition between firms, exploits consumers, and makes it difficult for the other players in the market to compete with the dominant undertaking,” as per the act. The case between Amazon, Flipkart and CCI has been going on since 2020. Here's a look at the timeline of the case.

Timeline of the Case 

On January 13, 2022, the CCI passed an order to investigate Flipkart and Amazon for anti-competitive practices. The investigation related to its exclusive arrangement practices, deep discounting and also preferential listing on labels. 

Following this, the CCI asked the DG to investigate the issue and find out whether the e-commerce giants were using the abovementioned allegations as exclusionary tactics to harm competition. 

Taking into consideration both Amazon and Flipkart, the commission also highlighted that these allegations were interconnected. Thus, it required a comprehensive investigation into vertical agreements and their impact on competition. 

The investigation was put on hold for a year by the Karnataka High Court in February 2020 after the probe was challenged by both the e-commerce gains, where they mentioned that the CCI doesn’t have any evidence to show that the e-commerce platforms didn’t follow competition. 

Flipkart reportedly mentioned in its statement, "Such an order exposes responsible corporate entities... to the rigors of an intrusive investigation prejudicially affecting not only its credibility and reputation but also its commercial prospects.” Amazon, on the other hand, mentioned that the order passed by the CCI was “perverse, arbitrary, and untenable in law".

However, in June 2021, the Karnataka High Court dismissed the plea by the companies and allowed the investigation to continue. Justice PS Dinesh Kumar of the Karnataka High Court mentioned that it would be unwise to prejudge the issue and scuttle the investigation. 

Soon after this, in July 2021, Amazon filed a special leave petition with the Supreme Court on the issue. Flipkart also moved the Supreme Court for relief and asked for a restraint on the investigation by the CCI and mentioned that the CCI was doing an invasive investigation.

In its investigation, the CCI asked the two e-commerce giants 32 questions on July 15, as per Reuters. The questions relate to the pacts with the smartphone makers, online discount given by the tech giants and more. Additionally, the CCI asked the two companies to provide a list of the top 100 sellers of the firms between 2015 to 2020.

On August 9, 2021, much to the disappointment of the companies, the Supreme Court squashed the plea of both the companies and allowed the investigation of the CCI to continue. The bench led by then chief justice of India NV Ramana said, “As big e-commerce organisations, you should volunteer for antitrust investigations.”

In February this year, the Confederation of All India Traders (CAIT) also wrote to the CCI and urged the commission to speed up the investigation. In a letter to the CCI, CAIT National General Secretary Praveen Khandelwal wrote, “The Competition Commission of India (CCI) must attach utmost priority to the case and pass a final penalty order and direction to Flipkart and Amazon to stop their illegal activities, as the outcome of the case has a serious bearing on the survival of lakhs of retailers and their families.”

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The CAIT also mentioned that these entities have been practicing monopoly by exclusive launches of mobile phones. Further, the confederation mentioned that Flipkart and Amazon delayed the investigation against them by filing litigations. 

Allegation of Predatory Pricing Against Amazon 

Amid the ongoing situation, union minister Piyush Goyal recently said that Amazon practices predatory pricing which in turn could affect small sellers. The minister said at an event, “If you make Rs 6,000 crore loss in one year, does that not smell like predatory pricing to any of you?” 

While pointing out loopholes in the platform, the minister also mentioned that being an e-commerce platform, Amazon is not allowed to do business-to-consumer business.

Goyal added, "But they only re-route all the business through an entity to show that it is B2B, but reality is all of you buy on these platforms. How do you buy? B2C is not allowed; how are they doing it? Should this not be a matter of concern for all of us?" Under the Foreign Direct Investment (FDI) policy of India, 100 percent FDI is allowed for B2B e-commerce companies. This basically highlights that Amazon cannot directly be a seller to retail consumers. 

Goyal's recent remark highlights the government's growing scrutiny of the e-commerce sector. While the CCI initially rejected complaints in 2020 against Amazon Seller Services Pvt. Ltd., Amazon Export Sales LLC, and Cloudtail India Pvt. Ltd. for unfair business practices, it later decided to investigate issues related to anti-competitive practices against Flipkart and Amazon. This shift reflects the increasing regulatory focus on ensuring fair competition within the rapidly expanding e-commerce industry.

Both Amazon and Flipkart have a dominating presence in India. As per Redseer Strategy Consultants, the market share of Amazon was 35 per cent in the online retail market in India in 2022, while Flipkart led the race with a 38 per cent market share. Thus, the judgment given to Amazon will be closely watched by other e-commerce giants.

Further, Amazon is being criticised in other markets as well. For example, in the USA, October 2026 has been set as the trial date for an antitrust lawsuit by the Federal Trade Commission against Amazon. The lawsuit was filed against the e-commerce giant on allegations of practicing illegal monopoly by the company. As we wait and observe how the judgment unfolds, one thing that is clear is that amid the surge of e-commerce platforms, the monitoring is also increasing by the authorities.