CCI probe on competition law violations: Karnataka High Court Division Bench reserves judgment in appeals by Amazon, Flipkart

The Karnataka High Court on Friday reserved its judgment in a batch of appeals moved by e-commerce giants, Amazon and Flipkart challenging a June 11 order of the single-judge, dismissing their pleas on probe by Competition Commission of India (CCI) for alleged competition law violations. .A Division Bench of Justices Satish Chandra Sharma and Natraj Rangaswamy further directed all the parties to file their written submissions by July 2. .Amazon had approached the Karnataka High Court against a CCI order which had directed the Director General to conduct an investigation into allegations of anti-competitive conduct in the online sale of smartphones on its platform.The informant before the CCI, Delhi Vyapar Mahasangh (DVM), had levelled allegations of predatory pricing, deep discounting, preferential seller listing, and exclusive partnerships, among others, against Amazon and Flipkart.DVM is an organisation whose members comprise traders from many micro, small and medium enterprises, and rely on trade of smartphones and related accessories.On June 11, single-judge Justice PS Dinesh Kumar dismissed the petitions filed by Amazon and Flipkart. Subsequently, appeal petitions were filed by them challenging that order.Over the course of past week, Amazon, Flipkart, CCI and DVM made their submissions in the matter before the Division Bench. .Amazon, Flipkart file appeal in Karnataka High Court against Single Judge order dismissing challenge to CCI probe; matter to come up tomorrow.Additional Solicitor General (ASG) Madhavi Divan submitted that because of a search bias in the respective platforms, the e-commerce entities are pushing up certain sellers. Visibility for all sellers is supposed to be the same, there has to be rational criteria for the same, submitted Divan. Further, it was contended that since Amazon and Flipkart favour certain sellers, they are active participants in the process. Therefore, it cannot be said that they are not part of the production chain which involves supply, distribution etc.Divan further contended that the idea of the Competition Act is to eliminate anti competitive elements and to ensure that everybody is on a level playing field. "If there is nothing to hide, then there is no reason to scuttle the investigation", submitted Divan. Amazon, on the other hand, submitted that the algorithm in Amazon is dictated by consumers and preferential listing is based upon the reflection of the consumers.“Even PPE kits, sanitizers – the algorithm will inform which seller will bring it to your area the fastest, who gives it in the best condition etc. This is based on what the consumers say… that Preferential listing is based upon reflection of the consumers.”Further, Amazon submitted that the single-judge failed to appreciate that an online marketplace which by its very design is an instrument to promote competition, could not be treated as anti-competitive unless there was clear and cogent evidence to that effect.Senior Advocate Harish Salve, appearing for Flipkart, submitted,"If I give someone gives a discount on rent, how does it become an agreement in production scale.”Advocates Abir Roy and Gautamaditya Sridhara, appearing for DVM, submitted that Amazon in their writ petition had mentioned that there are agreements which they sign with smartphone manufacturers. This itself showed that there they have such understanding with the sellers and the nature of such agreements needs to be investigated. Further, it was said that Flipkart themselves relied on a case of Jasper (Snapdeal) where CCI has noted that agreement between marketplace and sellers are vertical agreements and hence part of value chain.