The ongoing tug of war between Offline and Online retailers in India seems to be far from over. On Monday, the Competition Commission of India ordered a probe against Flipkart and Amazon to investigate a prima facie case involving practices that are against the Competition Act, 2003.
The investigation was ordered in light of a complaint filed by Delhi Vyapar Mahasangh, a representative group for offline traders in the NCR.
The committee that appointed the investigation has ordered the Director-General of the CCI to act as chief investigator in the case and submit a report on the issue within 60 days.
The allegations against the e-commerce giants, that collectively hold a majority of the Indian e-commerce market share, have to do with smartphone sales on the websites.
The Delhi Vyapar Mahasangh has accused the companies of preferential listings of products, deep discounts, promoting preferred sellers, and exclusive launch partnerships with smartphone companies. The group holds that these tactics employed by the big-shot online marketplaces interfere with opportunities for smaller sellers on these platforms, who are then left with no room to expand their business in the online realm.
On the evaluation of the document submitted by the Delhi Vyapar Mahasangh and some research of its own, the CCI concluded that the allegations at hand warrant an inspection.
The CCI is of the view that the act of promoting several affiliated sellers (for instance, Cloudtail and Appario Retailers are owned in part by Amazon, and appear as preferred sellers on the online marketplace), selling personal brands via these sellers, providing significant discounts and a share in monetary benefits to these sellers, and partnering with mobile phone companies to exclusively launch and sell their products through these sellers are all practices that “create an ecosystem that may lead to an appreciable adverse effect on competition.”
Amazon and Flipkart’s Stance
When approached by leading reporting agencies about the same, Amazon and Flipkart rejected the allegations, insisting that they comply with current competition and FDI laws.
In response to the probe, an Amazon spokesperson said, “We welcome the opportunity to address allegations made about Amazon; we are confident in our compliance and will cooperate fully with CCI.” This particular development comes at an interesting time for Amazon, as CEO Jeff Bezos is set to visit India this week to meet key policymakers.
A Flipkart spokesperson also asserted the company’s compliance with FDI laws. “We take pride in democratising e-commerce in India and giving market access to lakhs of MSMEs, sellers, artisans and small businesses, making quality and affordable goods available to consumers through our transparent and efficient marketplace while creating lakhs of jobs,” they added.
Further Implications of the Probe
Ashok Gupta, the chairman of CCI told Business Standard that the investigation at hand will add significantly to the prevailing understanding of e-business models as such an inquiry is a first for the Commission.
According to data quoted by the CCI, Flipkart and Amazon launched 67 and 45 exclusive mobile phones, respectively, in 2018.
Prateek Khandelwal, the secretary-general of Confederation of All India Traders – a body that has been actively speaking up against malpractices in the e-commerce sphere – says the final agenda of all these endeavours is to ensure FDI compliance by the e-commerce giants or eliminate them from the Indian market completely.
However, these are lofty aspirations considering the power Flipkart and Amazon have in the Indian e-commerce realm. The companies reached record sales, including orders from multiple remote areas in the country, during the 2019 festive season. Additionally, the projected worth of the Indian e-commerce market by 2023 is estimated to be $65 billion. Some experts believe smaller e-retailers are soon to give stiff competition to e-commerce giants in specific areas such as pharma, babycare, furniture, etc.