CCI finds Amazon and Flipkart violating antitrust laws

An Indian antitrust investigation has found that U.S. e-commerce giant Amazon and Walmart’s Flipkart violated local competition laws by giving preference to certain sellers on their shopping websites, according to reports seen by Reuters.

The Competition Commission of India (CCI) in 2020 ordered an investigation into Amazon and Flipkart for allegedly promoting certain sellers with whom they had business agreements and giving preference to certain offers.

In a 1,027-page report on Amazon and a separate 1,696-page report on Flipkart, both dated August 9, CCI researchers said the two companies had created an ecosystem in which preferred sellers appeared higher in search results and crowded out other sellers.

“Each of the alleged anti-competitive practices … was investigated and found to be true,” said both reports, which are not public and were first published by Reuters.

“Regular salespeople remained mere database items,” the two reports said, drawing identical conclusions for both companies.

Amazon and Flipkart, as well as the CCI, did not immediately respond to questions from Reuters. They have previously denied wrongdoing and said their practices are in line with Indian law.

The two companies will now study the report and file any objections before CCI staff decides on any possible fines.

The investigation’s findings are the latest setback for Amazon and Flipkart in a country where they continue to face criticism over their trading practices from smaller retailers, who say their businesses have suffered in recent years due to heavy discounts offered online.

The investigation was launched following a complaint by Delhi Vyapar Mahasangh, an organisation affiliated to the country’s largest trade body, Confederation of All India Traders (CAIT), which represents 80 million retailers.

In a statement to Reuters, CAIT welcomed the findings of the CCI investigation and said it would study the reports and “escalate” the matter with the federal government.

Amazon and Flipkart are leading players in the Indian e-retail market. According to consulting firm Bain, the market is expected to be worth $57 billion (approximately Rs 4,78,372 crore)-60 billion (approximately Rs 5,03,550 crore) by 2023 and is expected to be worth over $160 billion (approximately Rs 1,342,800 crore) by 2028.

In the United States, the Federal Trade Commission has sued Amazon, alleging that the company uses “anticompetitive and unfair strategies to illegally maintain its monopoly position.” Amazon has said the FTC lawsuit is misguided and would harm consumers by leading to higher prices and slower deliveries.

Preferred listing, high discounts

During the investigation, Indian investigators raided select Amazon and Flipkart sellers, following a 2021 Reuters investigation based on internal Amazon documents that found the company had favored a small group of sellers on its platform for years and used them to circumvent Indian law.

The company denies any wrongdoing, but the CCI previously told an Indian court that the Reuters special report corroborated the evidence against Amazon.

The CCI’s research report into Amazon found that preferred sellers on the platform “get an edge on (online) deals” and that when a customer searches for a product, “their attention is drawn to” those deals.

The practice of preferential offers and deep discounts on mobile phones – including selling products below cost – has “a catastrophic impact on existing competition in the market.”

In its report on Flipkart, the CCI said that preferred sellers were offered various services such as marketing and delivery at a “minimum price”. Flipkart also allowed them to sell phones at high discounts, which amounts to “predatory pricing” and excludes competition, the CCI said.

“The anti-competitive practices are not limited to the sale of mobile phones. They occur equally in other categories of goods,” both reports said.

Flipkart and Amazon tried to block the investigation for months by taking legal action, but the Supreme Court eventually allowed the investigation in 2021.

Last month, India’s commerce minister publicly criticized Amazon, saying the company’s investments were often used to cover losses.

Amazon said in June last year that it will increase its Indian investment to $26 billion by 2030, including for its cloud business. It also targets $20 billion in goods exports from India by 2025.

© Thomson Reuters 2024

(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)