CCI’s Order Of Investigation Is Arbitrary And Without Application Of Mind, Amazon Tells Karnataka High Court
Employees prepare a cart stacked with packages at the Amazon fulfillment center in Hyderabad. (Photographer: Dhiraj Singh/Bloomberg)

CCI’s Order Of Investigation Is Arbitrary And Without Application Of Mind, Amazon Tells Karnataka High Court

The Competition Commission of India’s order directing an investigation against Amazon is without application of mind, perverse and unreasonable, the online retailer argued before Karnataka High Court.

Amazon is challenging the CCI’s January order which said that the allegations of anti-competitive practices against the e-commerce marketplace deserved a detailed investigation. The information was filed by Delhi Vyapar Mahasangh against Flipkart and Amazon.

In its prima facie order, the regulator had concluded that the exclusive arrangements between mobile phone brands and Amazon merit an investigation.

It needs to be investigated whether the alleged exclusive arrangements, deep-discounting and preferential listing by the opposite parties [Amazon, Flipkart] are being used as an exclusionary tactic to foreclose competition and are resulting in an appreciable adverse effect on competition.

CCI in its order dated Jan. 20

Amazon appealed this order before the Karnataka High Court saying the CCI directed this investigation without even giving it an opportunity to respond to the allegations. It has called CCI’s actions as an “open-ended fishing expedition” and a misuse of its powers. It says the regulator has directed this investigation by primarily relying upon the evidence against Flipkart and hence has failed to meet the rule of reason framework.

Amazon is entitled to protection under Articles 14 and 21 of the Indian Constitution against unreasonable, unwarranted, arbitrary and mala-fide action of any government or statutory authority, it said in its petition before the high court. BloombergQuint has reviewed a copy of Amazon’s petition.

This is a repeat of allegations made by All India Online Vendors Association against Amazon earlier which have already been rejected by the CCI. Sellers on Amazon marketplace procure products directly from manufacturers and exclusive launch of mobile phones is a marketing tool used by them for sales promotion, according to the petition.

The company is also arguing that brands which had exclusive sale offers on Amazon marketplace also have a significant presence in the offline market and therefore it cannot be said that exclusive launches by them caused an adverse appreciable effect on competition in the smartphone sale market in India. It said the contracts with third-party sellers don’t stipulate any exclusivity obligations and its services are available to all sellers who register themselves with the Amazon marketplace.

Exclusive supply agreements violate section 3(4) of the Competition Act and are considered anti-competitive. The CCI order directing the investigation fails to classify the alleged deep discounting, preferential listing and preferred seller arrangement under any category enumerated under section 3(4) of the Competition Act. This section defines an anti-competitive agreement to include tie-in arrangement; exclusive supply agreement; exclusive distribution agreement, tie-in arrangement; exclusive supply agreement among others.

Besides challenging CCI’s prima facie order, Amazon has also sought a stay on the Director General’s investigation until the high court decides on the matter. The company says it’s part of the internationally reputed Amazon Group and the news of an antitrust investigation in India will result in reputation consequences.

The hearing will continue before the Karnataka High Court on Friday.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.