How CCI Can Spoil Amazon, Flipkart's Festive Party Amidst Battle with Quick Commerce

E-commerce and quick commerce firms keep experimenting with new designs to attract more consumers and increase their market share. Amid this ongoing competition, authorities have intensified their scrutiny of these platforms. The latest being a Competition Commission of India (CCI) probe where it was found out that Amazon and Flipkart breached anti-competitive laws in India. The investigation comes amidst the battle between quick commerce and e-commerce firms in India to capture a greater share of the market.

In its latest findings by the CCI that was seen by Reuters, it was observed that the two e-commerce platforms gave preference to certain sellers. The documents released by the competition watchdog reportedly says, "Each of the anti-competitive practices alleged... were investigated and found to be true.” 

What CCI's Probe Reveal About Amazon and Flipkart

Flipkart, which was launched in October 2007 as a small start-up that delivered books, is today one of the biggest e-commerce platforms with a giant market share of 48 per cent. While e-commerce platform Amazon with a market share of 21 percent as per Redseer Strategy as of 2022. 

While both the companies have different stories of origin, one thing that was the same for them was the thirst for growth and increasing their penetration. The more than 1,000-page CCI reports released by the watchdog mention that both platforms treated ordinary sellers as mere data bases. 

With regards to selling mobile phones, the platforms reportedly practiced predatory pricing and provided steep discounts on mobile phones. This, in turn, had a huge impact on ordinary sellers of the country, as per CCI documents seen by Reuters. 

The watchdog also mentioned that manufacturers like Samsung and Xiaomi collaborated with Flipkart and Google to launch their products exclusively on these platforms. With regards to Flipkart, the practice of selectively launching the products on its platform was reportedly done by companies including Samsung, Xiaomi, Motorola, Vivo, Lenovo and Realme. 

For Flipkart, the practice of selective launch was done by companies including Samsung, Xiaomi, Motorola, Realme and OnePlus. Post this, the CCI has asked some of the smartphone companies to submit their financial results after being certified by an auditor. 

The CCI report also indicates that, along with online sellers, retail shops were also affected due to this exclusive launch.

The exclusive launch of products on e-commerce websites is no secret to anyone. For example, Xiomi made its India debut with Flipkart way back in 2014. Post this, there were often reports about how sales of the mobile phones skyrocketed on the platform since the launch. That was the case for the Xiaomi Mi3, which cost Rs 13,999 in 2014. Amid the accelerated demand, some couldn’t buy the phones. To make up for that, both the companies (Flipkart and Xiaomi) said in a statement, “On October 6 [2014], around 25,000 Mi fans who have tried to buy Mi 3 at least five times or more will find the device added to their cart on Flipkart.com. These fans will now get a chance of buying the Mi 3 without having to register or hit the ‘buy’ button.” 

Read: Govt Probes into Quick Commerce Platforms and its Dark Store Ownership Structures

While Xiaomi ended its exclusive partnership with Flipkart and jumped to Amazon, exclusive tie ups became a trend that was being followed by the e-commerce platforms.

Meanwhile, amidst the ongoing charges of anti-trust probe against the e-commerce platforms, a question that looms in now is whether the watchdog will be more rigid with e-commerce platforms henceforth. 

What About Festive Season Sales? 

Experts suggest that going forward, this will make the CCI more proactive. The proactiveness might even make the e-commerce firms rethink their sales strategy, add experts. 

“The CCI has to tread a very fine line to ensure that the inherent benefits of scale and convenience for consumers and third-party sellers provided by e-commerce platforms are not sacrificed,” says Natasha Treasurywala, Partner, Desai & Diwanji. 

When a company breaches anti-competitive practices, under Section 27 of the Competition Act of 2002, the CCI can fine up to 10 per cent of their average turnover from the last three years for anti-competitive actions. If it's a cartel, the fine can be three times their profit or 10 per cent of their turnover for each year the cartel operated, whichever is higher. 

With regards to the e-commerce platforms partnering with mobile phone companies for exclusive manufacturing, experts say that presently, the Competition Act does not address or deal with provisions related to joint or collective dominance. “Nonetheless, since Section 4 of the Act prohibits predatory pricing, CCI may direct an additional investigation into Samsung and Xiaomi if such practices are suspected and such collusion may be treated as a cartel, resulting in heavier penalties,” says Kinjal Champaneria, Partner, Solomon & Co. 

E-commerce is synonymous with annual festive sales. Something for which both consumers and the platforms wait simultaneously. Whether it's Flipkart's Big Billion Sale or Amazon's Great Indian Festival, customers look forward to discounted prices, while the platforms count on a surge in sales.

As these e-commerce platforms come up with up to 70 per cent, 75 per cent discounts and lucrative offers to attract consumers, concerns about predatory pricing are also on the rise. The increased concern by authorities might in turn affect the way these platforms price customers. 

“Amazon and Flipkart would now need to be more cautious, ensuring their pricing strategies and exclusive arrangements do not fall within the ambit of anti-competitive practices,” says Champaneria. 

According to experts, if Amazon and Flipkart continue to violate the law, the CCI might issue a cease and desist order against them. This might affect their regular business operations and sales occasions like the Big Billion Days sale. 

This development comes at a time when the government is also increasing its scrutiny of quick commerce platforms. Recently, the Economic Times reported that the government has asked quick commerce platforms to shed more light on their dark store ownership. Foreign-funded firms cannot own inventories in India as per the FDI rules of the country. 

As a result, these dark stores are not owned by the quick commerce platforms but by other entities. The media report suggests that there are some gray areas and as a result, the government wants to have more clarity on the same.

Meanwhile, Amazon and Flipkart will have the chance to respond to the Competition Commission of India (CCI) findings once they are fully released. However, what remains significant is that the ruling will have an influence on how e-commerce and quick commerce firms operate in the Indian market.