'Don't Be Shy': Karnataka High Court Tells Amazon, Flipkart
The Amazon logo is displayed on a laptop in an arranged photograph taken in the Brooklyn borough of New York, U.S. (Photographer: Gabby Jones/Bloomberg)

'Don't Be Shy': Karnataka High Court Tells Amazon, Flipkart

E-commerce platforms Amazon and Flipkart have taken their legal fight against the Competition Commission of India to the Supreme Court. The companies have appealed against the decision of the Karnataka High Court, which has allowed the anti-trust investigation against them to continue.

In its written order, the high court division bench of Justices Satish Chandra Sharma and Nataraj Rangaswamy said Flipkart Internet Pvt. and Amazon Seller Services Pvt. want to crush the CCI investigation at the preliminary stage.

The case emanates from the CCI’s prima facie order in January last year against the two e-commerce companies. The regulator had directed a probe into their practices like discounting, exclusive tie-ups and private labels, saying they’re anti-competitive. On appeal, a single-judge bench in June had concluded that it would be unwise to scuttle the regulator’s investigation.

Now, the division bench has also come to the same conclusion.

In its order, the court said it’s unclear why the companies do not want to participate in the inquiry when they have the right to produce material before the regulator.

“The question of interference does not arise. The appellants [Amazon, Flipkart] do have a right to participate in the proceedings and/or under an obligation to produce all the materials as desired before the director general…” – Karnataka High Court

Relying on precedents set by the apex court, the order said interference is merited only if a show-cause notice is vague or has been issued by an authority not competent to do so. The case for neither has been made out.

…the order by the CCI directing an inquiry is the first stage of initiating process under the Competition Act and the inquiry is yet to commence. The appellants do not want to participate in the inquiry for reasons best known to them.
Karnataka High Court

The high court said there’s neither mala fides alleged against the regulator nor there is any jurisdictional infirmity.

Amazon and Flipkart had argued that the CCI does not have “jurisdictional facts”. For any investigation of this nature, the companies had argued, there must be an anti-competitive agreement that can adversely impact the market. No such agreement has been placed on record, Amazon and Flipkart had said.

Their argument that no notice had been issued to them before the regulator passed its order was also rejected by the high court. The statute does not provide for grant of an opportunity of hearing before passing a prima facie order under Section 26 at the pre-enquiry stage, the court held.

Such an order can be passed “when there is prima facie material to direct an inquiry and elaborate reasons are not required, as the CCI is required to express only a tentative view.” – Karnataka High Court

The issues related to deep discounting, preferential listing and exclusive tie-ups will be looked at in depth by the regulator’s investigation wing only when various agreements are brought before it. The appeals are premature and the companies should not feel shy in participating in the inquiry, the court said.

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