Ecommerce majors Amazon and Flipkart have to answer intricate questions about their business and agreements as part of a probe by the Competition Commission of India (CCI) over alleged anti-competitive practices. Both companies were denied any relief by the Supreme Court that dismissed the pleas by the companies on August 9 to quash the probe.
CCI had sent a list of questions to Amazon and Flipkart on July 15 and had initially sought responses by July 30. The Supreme Court, however, has given both players a four-week extension to respond to the questions.
The competition commission had ordered an investigation against Amazon and Flipkart in January 2020 over alleged anti-competitive practices such as preferential treatment to sellers, exclusive arrangements with smartphone makers, and deep discounting.
According to petitions filed by the companies in the Supreme Court, the questions by the office of the director-general of the CCI are pointed with the aim to seek answers on these practices.
CCI has asked Amazon and Flipkart to share details of the shareholding pattern since their incorporation, the platforms’ business model, and sources of revenue. The ecommerce firms also need to share the list of people who have been on the Board of Directors since 2015 and their contact information.
The commission has sought details of the holding or subsidiaries and group companies. The general policy of enrollment of a seller and listing of a product on the platform along with a copy of the agreement is also to be shared.
Regarding the agreement with certain sellers, CCI has asked Flipkart to reveal details of Omnitech retail, Vision Star and Flashstar commerce, while Amazon needs to share the details of the agreements with Cloudtail and Appario. Moreover, Flipkart needs to share details of products and sellers under the ‘Assured Seller’ whereas Amazon needs to share the same for those under the 'Fulfilled' tag.
The two companies must also share the list of charges they levy on sellers.
A list of all mobile phones launched on the platforms between 2015-2020, top 100 sellers from 2015 to 2020 along with the percentage of total sales, the direct and/or indirect participation of top sellers and details of funding since the date of incorporation are some of the other details that need to be shared with the CCI.
Amazon and Flipkart also need to list all sale events held between 2015-16. They must share the basis for organising the events along with all the relevant documents.
The companies will have to reveal the details about who decides the sale events, who zeroes in on the discount percentage, etc. and who bears the cost of the discount, the platform, or the seller.
Flipkart and Amazon did not respond to queries regarding CCI's investigation. Both companies have to furnish details to the questions within the timeline or else they will face a penalty.
The two ecommerce firms moved the Supreme Court last month to appeal against the July 23 order of the Karnataka High Court's division bench that dismissed their writ appeals challenging a June 11 order by a single-judge bench that had allowed the CCI to conduct the probe.
The top court has decided not to interfere with the high court order and added that the companies should voluntarily submit themselves to an investigation.
"We expect big organisations that Amazon, Flipkart should volunteer for inquiry or investigation., You don't even want an inquiry?," the three-judge bench led by Chief Justice NV Ramana said.
While the CCI had asked the Supreme Court to keep the extension for responding to their queries to only one week, the apex court has granted the petitioners four weeks to respond.
The competition watchdog had, on January 13 2020, ordered a probe against Amazon and Flipkart on a case filed by the Delhi Vyapar Mahasangh under Section 3 of the Competition Act.
Section 3 of the Act deals with anti-competitive agreements, and the Delhi-based association had alleged that both Amazon and Flipkart were indulging in deep discounting, exclusive arrangements with smartphone makers, and were giving preferential treatment to some sellers.
The CCI had asked the director general to investigate both the companies. However, in February last year, the Karnataka High Court had granted an interim stay on the CCI order after both companies approached it.
The CCI defended its move to conduct the probe against the ecommerce majors over anti-trust behaviour, which includes allegations of exclusive agreements with smartphone makers, stating that such agreements are often ‘tacit’.