Karnataka HC upholds nod for CCI probe against e-commerce giants

The Karnataka High Court single judge bench has upheld the CCI probe initiated against two large online retailers. The retailers had petitioned the CCI alleging predatory pricing, unfair advantage to a few sellers and other malpractices. With the appeal now dismissed the CCI probe will begin.

Karnataka HC upholds nod for CCI probe against e-commerce giants
CCI to go ahead with probe against e-commerce firms

The Karnataka High Court has dismissed a petition filed by e-commerce giants, Amazon and Flipkart.

The two companies had challenged the probe initiated against them by the Competition Commission of India (CCI). The CCI action was based on a complaint filed by the Delhi Vyapar Mahasangh (DVM).

The next course of action

In a statement to TV9 Digital, an Amazon spokesperson said that the American online giant would review the judgement carefully and decide on the next step.

The firm could file an appeal most likely with a two-member bench of the Karnataka High Court.

Traders elated

Meanwhile, the members of the Confederation of All India Traders (CAIT) have welcomed the Karnataka High Court’s decision.

“We want the Union Commerce Ministry to immediately release a new press note replacing the existing Press Note #2 of the FDI policy,” said B C Bhartia, the president of CAIT.

Press Note #2 mandates that foreign direct investment or FDI would not be permitted in inventory-linked ecommerce models. It also makes it compulsory for such marketplace e-commerce firms to file audited reports which are in compliance with the FDI norms.

The case

The genesis of the case can be traced to a petition filed by the DVM in 2019. The petition was filed with the CCI alleging anti-competitive activity by these two firms. The main grouse was centred on predatory pricing and preferential treatment being given to some sellers.

In January 2020, the CCI upheld the contention of the DVM and ordered investigations which was challenged by Amazon in the Karnataka High Court the very next month. At that point, the Karnataka High Court set aside the CCI’s order.

Matters took a different turn when in September 2020, CCI approached the Supreme Court, which instructed that the Karnataka High Court should continue the hearing.

Retail trade and Indian stance

Although India is home to 1.4 billion people, the rules relating to retail trade have left many frustrated. Initially, for instance, only investment was permitted in wholesale trading. Later, single brand retail was permitted with a maximum of 51% foreign direct investment provided they undertook a certain percentage of local sourcing. Now even these norms have been tweaked.

While now there is clarity on the offline model, the online retailing model hasn’t gone down well with many traders who are called as kirana (the colloquial name for mom and pop stores). How the legal tussle moves will certainly have a major impact on the future of online retailing in India.

Whatever be the decision, the Indian consumer shouldn’t be getting a raw deal and this is something that all stakeholders need to be cognizant of.