Doomsday clock ticking for Flipkart Amazon

The case is likely to settle the position on two key powers of CCI: search & seizure and expanding the ambit of probe, say legal experts.

India’s crackdown against alleged anti-competitive practices adopted by e-commerce platforms Amazon and Flikpkart has reached the Supreme Court. Late last week the Competition Commission of India(CCI) filed a transfer petition in the apex court seeking its intervention to stop ‘frivolous’ litigation being initiated by the e-commerce platforms and sellers to stall the probe. Some legal experts say CCI’s move is unusual.

The case is expected to settle questions regarding two key powers of the CCI: one pertaining to its search and seizure powers and secondly the power of the Director General(DG) of CCI to widen the ambit of a probe, legal experts said. Any adverse outcome from the case could delay the CCI probe into the matter further and could also provide a precedent for other cases, say legal experts.

According to court filings dated December 3 accessed by Moneycontrol, CCI has prayed to the Supreme Court to transfer 24 different cases pending across various high courts of the country, including the Karnataka High Court, Delhi High Court and High Court of Telangana, to the apex court. A bench is yet to be assigned for the CCI appeal in the Supreme Court, data showed.

While the first leg of investigation was halted due to writ petitions filed by Amazon and Flipkart, currently the probe is being stalled by the sellers of the e-commerce platforms.

“It is important to note that even though the investigation was to be commenced in 2020, it was substantially delayed, in part due to the stay granted in favour of Amazon and Flipkart in the first round of litigation. 4 years have passed, and a final order is yet to be passed in the present case,” CCI said in the petition dated December 3.

Generally, writ petitions and transfer petitions are filed by private parties when regulators or government agencies interfere with the constitutional rights of the private entity. However, in this case a regulator has filed a writ petition alleging its rights as a regulator were being blunted by the e-commerce platforms and their sellers.

Search and seizure powers of CCI challenged by e-commerce sellers

One of the key questions of law raised in these cases pertains to whether CCI can raid and seize evidence for a probe where the raided e-commerce seller was a third party, say legal experts.

In January 2020, CCI initiated a probe and Amazon, Flipkart and other affiliated parties into alleged anti-competitive practices including giving preference to select sellers who were closely connected to the e-commerce platforms. This investigation was initiated following compliant from Delhi Vyapar Mahasangh – a lobby group for small and retail traders.

In 2022 April, CCI had conducted a search and seizure operation on various big sellers on the e-commerce platforms during which various electronic data including emails and financial records were seized by the commission.

Back then, the case was centred around the role of Amazon and Flipkart. Since the sellers had financial dealings with the platforms under probe, CCI had conducted the raids. The e-commerce sellers including Cloudtail have raised a question of law in this regard, arguing they were third parties unrelated to the platforms and the commission could only raid parties being probed and not third parties.

The entities being raided included Cloudtail, Appario Retail, Rocket Kommerce amongst others. Appario retail told the Karnataka High Court earlier this year that despite the seller cooperating with the CCI probe, the commission had decided to raid its premises.

“Not only was there gross violation of principles of natural justice but confidential and proprietary data of the Petitioner as also sensitive personal data and information of officials of the Petitioner were seized during the search and seizure operation. The Petitioner had raised immediate concerns with the Respondents in respect of the utter disregard to the mandatory condition precedents prescribed by law for the conduct of such operations.” Appario told the court.

Various courts stayed the probe until the cases were decided. Currently, these are still pending at various stages but due to the interim stay, CCI has not been able to go ahead with the probe.

“That these writ petitions(filed by sellers) even though entirely misconceived on the issues of law, are causing grave prejudice to the Petitioner Commission since its inquiry in the case has been halted,” CCI told the Supreme Court.

Various courts stayed the probe until the cases were decided. Currently, these are still pending at various stages but due to the interim stay, CCI has not been able to go ahead with the probe.

“That these writ petitions(filed by sellers) even though entirely misconceived on the issues of law, are causing grave prejudice to the Petitioner Commission since its inquiry in the case has been halted,” CCI told the Supreme Court.

“There is a strong likelihood that the common issues raised in this writ petition will be assailed to this Hon’ble Court irrespective of decisions rendered by the High Courts. However, in the meanwhile, the proceedings before the Petitioner shall remain obstructed thereby affecting the public and e-commerce sector as a whole,” said CCI to the apex court.”

Apex court to rule applicability of Madras High Court verdict in MRF case

In the context of a recent case heard by the Madras High Court could be relevant legal experts say. On April 30, 2024, the Madras High Court passed what some lawyers say is an unusual verdict in a case involving tyre companies being probed for cartelisation.

If this Madras High Court precedent is accepted by the Supreme Court, it could delay the CCI probe by another few months since the commission will have to take corrective measures and include the sellers as opposite parties in the case. However, a potential probe is unlikely to be stayed by courts, legal experts add.

In this case the complaint was originally against JK Tyres. During the probe in 2020, CCI sought information from other tyre companies including MRF and they were referred to as third parties. According to court filings, in March 2024, MRF got to know that CCI was impleading the company as an opposite party. It then moved the Madras High Court which ruled that CCI could not change the status of a company from ‘third party’ to ‘opposite party’ without giving prior notice to MRF. The e-commerce sellers are now banking on this verdict to stall the CCI probe.

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