BREAKING: Karnataka High Court junks appeals by Amazon, Flipkart against Single Judge's dismissal of challenge to CCI probe into smartphone sales

The Karnataka High Court today upheld a Single Judge order dismissing the pleas filed by Amazon and Flipkart challenging a probe initiated by the Competition Commission of India (CCI) for alleged competition law violations..A Division Bench of Justices Satish Chandra Sharma and Natraj Rangaswamy passed the order in a batch of appeals moved by the e-commerce giants against a June 11 order of a Single Judge of the High Court..While dismissing the plea, the Bench held,"By no stretch of imagination can inquiry be quashed at this stage...Appellants should not be afraid of investigation of CCI...In the considered opinion of the Court, appeals filed by appellants are devoid of merit and deserved to be dismissed...".The matter was reserved for judgement on June 25. .Amazon had approached the Karnataka High Court against a CCI order which had called for a Director General (DG) investigation into allegations of anti-competitive conduct in the online sale of smartphones on its platform.The informant before the CCI, Delhi Vyapar Mahasangh (DVM), had levelled allegations of predatory pricing, deep discounting, preferential seller listing, and exclusive partnerships, among others, against Amazon and Flipkart..DVM is an organisation whose members comprise traders from many micro, small and medium enterprises, and rely on trade of smartphones and related accessories..On June 11, Justice PS Dinesh Kumar dismissed the petitions filed by Amazon and Flipkart. Subsequently, appeal petitions were filed by them challenging that orderAmazon, Flipkart, CCI and DVM then made their submissions in the matter before the Division Bench..Amazon, Flipkart file appeal in Karnataka High Court against Single Judge order dismissing challenge to CCI probe; matter to come up tomorrow.Additional Solicitor General (ASG) Madhavi Divan, appearing for CCI, submitted that because of a search bias on the respective platforms, the e-commerce entities are pushing up certain sellers. Visibility for all sellers is supposed to be the same, and there has to be rational criteria for the same, submitted Divan.Further, it was contended that since Amazon and Flipkart favour certain sellers, they are active participants in the process. Therefore, it cannot be said that they are not part of the production chain that involves supply, distribution etc..Divan further contended that the idea of the Competition Act is to eliminate anti-competitive elements and to ensure that everybody is on a level playing field."If there is nothing to hide, then there is no reason to scuttle the investigation", submitted Divan..Amazon, on the other hand, submitted that its algorithm is dictated by consumers and preferential listing is based upon the reflection of the consumers.“Even PPE kits, sanitizers – the algorithm will inform which seller will bring it to your area the fastest, who gives it in the best condition etc. This is based on what the consumers say… that Preferential listing is based upon reflection of the consumers.”.Further, Amazon submitted that the Single Judge failed to appreciate that an online marketplace which by its very design is an instrument to promote competition, could not be treated as anti-competitive unless there was clear and cogent evidence to that effect.Senior Advocate Harish Salve, appearing for Flipkart, submitted,"If I give someone gives a discount on rent, how does it become an agreement in production scale?”.Advocates Abir Roy and Gautamaditya Sridhara, appearing for DVM, submitted that Amazon in its writ petition had mentioned that there are agreements which they sign with smartphone manufacturers. This itself showed that there they have an understanding with the sellers and the nature of such agreements needs to be investigated..Further, it was said that Flipkart themselves relied on the Snapdeal case, where CCI has noted that agreements between the marketplace and sellers are vertical agreements and hence part of the value chain.