'They Should Not Feel Shy In Facing Inquiry': Karnataka High Court Dismisses Amazon & Flipkart Pleas Against CCI Probe

A division bench of Justice Satishchandra Sharma and Justice Nataraj Rangaswamy observed,

"...in the concerned opinion of this court by no stretch of imagination the inquiry can be crushed at this stage. If the appellants are not involved in violation of any provisions of the Act of 2002 they should not feel shy in facing inquiry by CCI."

The Bench added,

"In the concerned opinion of this courts the appeals are devoid of merits and substance and deserves to be dismissed and are according dismissed."

The Court had on June 25 reserved its order after hearing all the parties. The two companies had challenged an order of the CCI passed in January 2020 under Section 26(1) of the Competition Act directing the Director General to investigate the allegations against Amazon and Flipkart.

Background

The CCI order came on a complaint filed by Delhi Vyapar Mahasangh (an organization of retailers) who alleged that Amazon and Flipkart were giving preferential treatment to a select set of vendors by having indirect control on their operations, especially the launch of smartphones. The DVM alleged that the e-commerce companies were abusing their competitive position. The CCI, finding prima facie merit in the complaint, a probe into the practices of Amazon and Flipkart like discounting practices, exclusive tie-ups and private labels,

This order came to be challenged before the Karnataka High Court which granted an interim stay on the CCI order. The order was challenged by CCI before the Supreme Court. The court in October 2020, refused to grant any relief but asked the Karnataka High Court to decide on CCI's plea to probe into the alleged anti- competitive practices of the e-commerce giants within six weeks.

Justice P S Dinesh Kumar heard the matter and dismissed the petitions filed by the companies. In his order dated June 11, 2021 while dismissing the petition the court said "it would be unwise to prejudge the issues raised by the petitioners in these writ petitions at this stage and scuttle the investigation", the Court said in the judgment.

Further, it had noted that under Article 226, the Court cannot substitute the views of the adjudicatory body with its views. Judicial review is not over the decision but over the decision making process. The court had observed "in a writ petition filed under Article 226 of the Constitution of India, seeking judicial review, the High Court can examine only the decision making process with the exception namely the cases involving violation of fundamental human rights. The law on the point is fairly well settled",

Senior Advocate Gopal Subramanian, appearing for Amazon, had argued that there was no jurisdictional fact enabling CCI to issue the order. Firstly, there must be an agreement, secondly, such agreement must be between the enterprises situated at different levels of the production or supply chain and thirdly, such agreement should cause or likely to cause AAEC.These requirements have not been satisfied. Therefore, there is no application of mind

Counsel for Flipkart had argued that the anti-trust body's prima facie views are not supported by any evidence or materials. They also highlighted that no agreement, which has adverse effects on competition, has been placed on record. The manufacturers of products sell them on Flipkart's online marketplace. If a seller chooses to sell exclusively on Flipkart's market place, it is his/her prerogative and Flipkart cannot be held responsible. The petitioners also argued that they were not served any notice by the CCI before passing the order.

Additional Solicitor General Madhavi Divan, defending the CCI, had submitted that the impugned order was only a direction for investigation and hence the challenge was premature. The ASG pointed out that the Commission has analyzed several aspects in the context of violation of Section 3(4) of the Act and the complexity involving the parameters of 'inter-platform', 'intra-platform' and 'inter-channel distribution'. The Commission has recorded the existence of preferred sellers, preferential listing etc., in the impugned order.