Former Amazon seller Appario Retail has sued the Competition Commission of India (CCI) in the Karnataka High Court concerning the ongoing antitrust probe against the e-commerce platform.
This was first reported by Reuters. Appario Retail highlighted that the report released by the CCI, which also has its name, must be set aside. In its earlier investigation, the CCI released two reports on Flipkart and Amazon that mentioned that the two e-commerce platforms practiced anti-competitive practices such as giving preference to select sellers, treating sellers as mere data bases and others.
Experts indicate that this development is important as it is the first challenge to the ongoing anti-trust probe that is happening in the Amazon-CCI investigation that started in 2020. Reuters has also mentioned that in its law suit, Appario Retail indicated that the recent CCI order that highlighted that Appario Retail should submit its financial records for the investigation should be quashed.
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Why Amazon Wanted to Delist Appario Retial?
Amazon decided to delist Appario Retail in 2022 after concerns and protests from local sellers. The decision was taken by the platform at a time when the CCI raided the offices of Appario and Cloudtail, two top sellers of Amazon, in April 2022.
Just to give some background, Appario Retail Private Limited is a subsidiary of Frontizo Business Services. Frontizo is a joint venture between Amazon, Zodiac Wealth Advisors LLP and Zaffre LLC that aims to provide customer support services in the online marketplace.
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Amazon and Appario Retail announced the news of delisting in a joint statement where they said, “Partners have decided that Appario Retail Private Limited, a wholly owned subsidiary of Frontizo, will cease to be a seller on amazon.in and amazon.in/business within the next 12 months. The partners will continue to explore new business opportunities, including helping businesses across India to scale up their online presence.”
Both Appario and Cloudtail were scrutinized by the CCI for being preferred sellers on the e-commerce platform. The competition watchdog investigated allegations of anti-competitive practices, unequal treatment, and vertical agreements between the platforms and Amazon.
Vertical agreement happens when select deals are signed by larger players with specific dealers. The CCI indicates that vertical selling includes tie-in arrangements, exclusive supply/distribution, refusal to deal and resale price maintenance.
Speaking to the Economic Times in 2022 at the time of the investigation, a source said, “CCI is probing allegations of all sellers not receiving equal treatment from ecommerce platforms and that (online marketplaces) enter into vertical agreements with select sellers.”
This was the same time when Amazon shut down its subsidiary Cloudtail as well in April 2022. Amazon decided to buy Prione Business Services, which owns Cloudtail. This ended Amazon's partnership with Narayana Murthy's company, Catamaran Ventures. At the time of the sale, Catamaran Ventures owned 76 per cent of Prione, while Amazon owned 24 per cent.
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The decision was taken by the company to comply with the Foreign Direct Investment (FDI) rules in the country. The FDI rules in India don’t allow e-commerce companies to hold stakes in sellers. This was the same reason Amazon reduced its holding in Appario Retail as well.
This was the same time when several traders groups, such as CAIT (The Confederation of All India Traders), repeatedly alleged that these select sellers were violating the competition law of the country.
Interestingly, while Amazon did talk about delisting Appario Retail in 2022, it never really happened. In 2023, there were reports that highlighted that Appario Retail was looking for new ways to keep selling on Amazon. Both firms were trying to come up with a new partnership structure to allow Appario to continue selling on Amazon.
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Eventually, in 2024, as per the Economic Times, another seller of Amazon, Clicktech, bought Amazon. The purpose of the move was to diversify Amazon’s stake in selectrs in the platform.
What Impact will the Lawsuit Have?
The probe against Amazon and Flipkart by the CCI has been going on since 2020. A recent Reuters report also mentioned that the CCI found in its probe that both Amazon and Flipkart breached competition laws in the country. "Each of the anti-competitive practices alleged... were investigated and found to be true," the CCI reportedly said. The investigation also found out that these platforms entered into exclusive deals with mobile phone giants such as Xiaomi and Samsung, which in turn harmed small traders.
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Experts indicate that this move by a seller to sue the CCI is a dicey area as the seller was a part of Amazon previously. Natasha Treasurywala, Partner, Desai & Diwanji, says, “The seller that has challenged the CCI probe was originally a joint venture between Amazon and its Indian partner. Therefore, the genesis of this particular lawsuit may be a bit skewed. If, however, other sellers come forward as well, this will certainly put some pressure on the CCI.”
Experts also point out that the current focus is on how major players like Amazon and Flipkart are violating competition laws, which could significantly alter the dynamics. “Having said that, the CCI still hasn’t issued an order against Amazon or Flipkart. Lawsuits by sellers cannot influence the legal position if they are found by the CCI to be in contravention of the Competition Act,” adds Treasurywala. While the final verdict of CCI is yet to come out, it will no doubt be an important landmark in the current ecosystem where e-commerce and quick commerce platforms have become dominant players in the marketplace.
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