In a setback to e-commerce majors Amazon and Flipkart, the Karnataka High Court, on Friday, upheld the Competition Commission of India’s decision to conduct an investigation through its Director-General into whether they had entered into anti-competitive agreements in violation of the provisions of the Competition Act 2002.
Justice PS Dinesh Kumar passed the order while dismissing the petitions filed by Amazon Seller Services Pvt Ltd, and Flipkart Internet Pvt Ltd.
The e-commerce companies had questioned the January 13 order of the CCI, which had ordered a probe through its Director-General.
“It is expected that an order directing investigation be supported by ‘some reasoning’, which the Commission has fulfilled. Therefore, it would be unwise to prejudge the issues raised by the petitioners in these writ petitions at this stage and scuttles the investigation.
“Therefore, the impugned order does not call for any interference,” said the Court. While vacating the stay granted in February 2020 on CCI’s order on January 13, 2020, for investigation, the High Court said that an order, passed by the Commission for investigation under Section 26(1) of the Act, is an administrative direction to one of its wings departmentally and without entering upon any adjudicatory process.
On the contention of the companies that CCI had not given then prior notice before ordering the investigation, the Court said that Section 26(1) of the Act does not mention about the issuance of any notice to any party before or at the time of formation of an opinion by the Commission on the basis of information received by it requiring investigation into certain agreements and dominant position of enterprise.
The High Court also agreed with the contention of the CCI that there is no bar on conducting a parallel investigation by its DG when the Enforcement Directorate is conducting a probe against the two companies on the allegation of violation of Foreign Exchange Management Act (FEMA), 1999.
The CCI had acted on a complaint by Delhi Vyapar Mahasangh (DVM), which had alleged that Amazon and Flipkart were giving preference to select sellers, and this has led to the foreclosure of ‘non-preferred sellers’ from the online market places; offering deep discounts by indulging in anti-competitive agreements. The HC, on February 14, 2020, had passed an interim order staying the CCI’s order. Following this, the CCI had approached the apex court, which in October 2020, had asked the CCI to approach the HC. With today’s order, the Director-General can proceed with the investigation and submit a report to the CCI.
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