E-retailers contest CCI probe in Karnataka High Court

E-retailers operating on major platforms like Amazon and Flipkart have contested the scope of the Competition Commission of India’s (CCI) ongoing investigation, arguing it exceeds the regulator’s authority. The matter was presented before the Karnataka High Court (HC) on November 27, with companies like Rocket Kommerce LLP and Sane Retail seeking exemption from the probe, which has been temporarily stayed by the court earlier this month.

The case, presided over by Justice Hemant Chandangoudar, stems from a CCI inquiry initiated in 2020 into alleged anti-competitive practices by Amazon and Flipkart, including favouritism toward select e-retailers. During the investigation, the CCI’s Director-General (DG) reportedly uncovered connections between these platforms and specific e-retailers, subsequently designating them as "opposite parties" in the case.

The e-retailers have challenged this reclassification, arguing it breaches procedural norms as the DG failed to secure CCI approval before altering their status. According to competition laws, the DG must operate strictly within the framework of the CCI’s initial probe directive and cannot expand its scope unilaterally.

The case has taken on added significance after recent raids by the Enforcement Directorate (ED) on some of the e-retailers implicated in the probe. The ED has launched a separate investigation under the Foreign Exchange Management Act (FEMA), alleging that Amazon and Flipkart circumvented foreign ownership rules by exerting indirect control over preferred sellers.

Legal experts believe the e-retailers may face an uphill battle. Courts, including the Delhi and Bombay High Courts, have previously upheld the CCI’s authority in similar cases. "If procedural lapses are proven, the likely outcome is that the DG will be directed to obtain proper approvals rather than the investigation being dismissed outright," noted a competition law specialist.

Indian competition laws require online marketplaces to treat all sellers equally, prohibiting favouritism. Alleged links between platforms and select e-retailers are considered vertical agreements, strengthening the CCI’s case.

The outcome of this case could have significant implications for the operations of e-commerce platforms in India. As scrutiny on their practices intensifies, similar regulatory actions have been initiated against other tech platforms, including food aggregators and Google Play services, for allegedly offering preferential treatment to certain players.