India vs Amazon, Flipkart: Why the CCI’s probe is justified

admin November 4, 2021
Updated 2021/11/05 at 6:16 AM

The Supreme Court has declared that the Competition Commission of India (CCI) will investigate e-commerce behemoths Amazon and Flipkart for suspected anti-competitive business practises. After the Karnataka High Court refused to prohibit the CCI from proceeding with a complaint brought against them by a traders group, the corporations went to the Supreme Court.

Why are Amazon and Flipkart being investigated?

Following a complaint made by the Delhi Vyapar Mahasangh (DVM), a group advocating the interests of small traders, the CCI launched an investigation into Amazon and Flipkart in 2020. Non-Neutral Platform: According to the complaint, the e-commerce behemoths favoured certain vendors on their platforms over others by granting cheaper fees and priority listing. Platform fee discounts can assist certain merchants in offering lower pricing than others. Preferential listing is a process in which certain vendors’ products are featured more prominently than the products of other sellers. Anti-competitive Practices: The DVM is also concerned about Amazon and Flipkart forming partnerships with phone manufacturers to sell phones solely on their platforms. The trade association claimed that this was anti-competitive because smaller traders couldn’t buy or sell these products. Concerns were also voiced about e-commerce corporations’ flash sales and significant discounts, which could not be matched by local businesses.

Arguments Against the CCI Investigation

Opponents of the CCI investigation see it as an attempt to defend the interests of small businesses over those of consumers. They say that Amazon and Flipkart’s competition is a good thing for millions of customers who can now get better products at lower prices. Despite the fact that these firms are evading the law in innovative ways, critics contend that such restrictions are superfluous and anti-competitive in the first place because they favour small traders over consumers. E-commerce platforms, according to the probe’s critics, are also businesses with the right to select how to list things on their platforms. They believe that prominent product listing is not limited to online platforms; supermarkets, too, have the ability to pick how prominently to display certain products on their shelves. In truth, because it is hard to offer all products equal prominence, preferential ranking of particular products may be unavoidable. Finally, CCI critics ignore concerns about predatory pricing, exclusive supply contracts, and market dominance. They argue that in the long term, none of this matters as long as new competitors are not barred from joining the market.

Arguments in Favor of a CCI Investigation

Supporters of the CCI investigation feel that the investigation is warranted, given Amazon and Flipkart’s growing market power. They claim that these businesses engage in predatory pricing (cheap prices, huge discounts) that have driven thousands of small businesses out of business. According to the Confederation of All India Traders (CAIT), huge e-commerce corporations pulled out over 50,000 mobile phone merchants and 25,000 kirana stores in 2019, soon before the coronavirus outbreak. The e-commerce behemoths are also accused of breaking the law on a regular basis in a variety of ways. One accusation levelled at these major corporations is that they have discovered a backdoor technique to market their own products through their platforms (not allowed as per e-commerce rules) According to sources, Amazon had an indirect ownership stake in a small number of vendors who generated the majority of the sales made on its site. It’s worth emphasising that in the retail sector, India does not allow foreign enterprises to compete with local sellers. Amazon and Flipkart (owned by Walmart) are only permitted to operate as neutral marketplaces that enable transactions between third-party sellers and purchasers for a fee.

What’s Next

As part of the Atmanirbhar project, the government is attempting to favour native enterprises, the regulatory burden on international e-commerce companies is anticipated to climb more in the coming days. To express his gratitude for the Supreme Court’s verdict against Amazon and Flipkart, Commerce Minister used the slogan “Quit India,” which refers to India’s independence campaign against British colonialism. Other multinational corporations, such as Mastercard, have been under increasing pressure from Indian officials to comply with domestic regulations in recent times. Such actions, to the extent that they favour native business groups over international business groups, may actually reduce competition in the home market, harming Indian consumers significantly.

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