[BREAKING] Karnataka High Court dismisses petitions by Amazon, Flipkart against CCI probe on competition law violations

The Karnataka High Court on Friday dismissed the plea filed by e-commerce companies, Amazon and Flipkart challenging the probe ordered by Competition Commission of India (CCI) against them for alleged violations of Competition Law [Amazon Seller Services and ors vs CCI]..The order was pronounced by Justice PS Dinesh Kumar while hearing two petitions moved by Amazon and Flipkart seeking to quash the probe ordered by CCI. "It would be unwise to prejudge the issues raised by the petitioners in these writ petitions at this stage and scuttle the investigation. Therefore, the impugned order does not call for any interference. Resultantly, these writ petitions must fail. Accordingly, Rule is discharged and writ petitions stand dismissed," the judgment said. .Senior Advocate Gopal Subramanium, appearing for Amazon, had contended that the Competition Commission of India (CCI) probe into e-commerce giant Amazon was in flagrant violation of the Competition Act. It was further pointed out that Enforcement Directorate is already investigating violations in the FDI Policy against the e-commerce giants. Therefore, CCI could not have exercised its jurisdiction whilst investigation by Enforcement Directorate is in progress, was the argument by Subramanium.Flipkart, who engaged Senior Advocates Udaya Holla and Dhyan Chinnappa as their counsel argued that the Commission must form a prima facie opinion before ordering investigation in the matter, which was absent in the instant case. It was further added that if a seller chooses to sell exclusively on Flipkart’s market place, it is his/her prerogative and Flipkart cannot be held responsible. .The CCI, represented by Additional Solicitor General Madhavi Divan however, argued that an investigation by the Enforcement Directorate (ED) under the Foreign Exchange Management Act, 1999 (FEMA) does not bar another investigation by the CCI for violations of Competition law. ASG Divan also told the Court that Amazon is looking to twist the pendency of an ED investigation into its working to ward off CCI's probe into alleged violations of Competition Law by the e-commerce giant.It was further submitted that the instant order in question, was passed by the CCI under Section 26 (1) of the Act. The threshold requirement for establishing prima facie case at the stage of Section 26(1) is low. .Amazon had first approached the Karnataka High Court against the CCI order which had directed the Director General to conduct an 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. Advocates Abir Roy and Gautamaditya Sridhara represented DVM. .What the Court held.After examining the rival arguments, which were made over a span of two months, the Court dissected the intent of the Competition Act as well as its various provisions..On the point of orders passed under Section 26 (1) of the Act, the Court adverted to the judgments in the cases of CCI Vs.Bharathi Airtel and CCI Vs. SAIL to hold that such orders under Section 26(1) are administrative directions.."An order under Section 26(1) of the Act passed by the Commission is an 'administrative direction' to one of its wings departmentally.......Section 26(1) of the Act does not mention about issuance of any notice to any party before or at the time of formation of an opinion by the Commission on the basis of information received by it," the judgment said. .Next, the Court examined if Commission had formed an opinion as to whether or not there exists a prima facie case as per Section 26. After going through the CCI order, the single-judge took the view that the Commission had examined the material produced by the informant. CCI, the Court said, had analyzed the information under various heads such as exclusive launch of mobile phones, preferred sellers on the market places, deep discounting and preferential listing of private labels."Commission has noticed that Flipkart has launched 67 mobile phones and Amazon has launched 45 mobile phones exclusively on their platforms. Commission has recorded (in paragraph 23) that petitioners have their own set of preferred sellers and there are only few online sellers which sell the exclusively launched smart phones," the Court noted. Thus, the Court concluded that a plain reading of the order showed that Commission had looked into the information in detail and applied its mind."It is expected that an order directing investigation be supported by 'some reasoning' (CCI Vs. SAIL para 97), which the Commission has fulfilled," the judgment said. On these grounds, the Court proceeded to dismiss the two petitions. .CCI was represented by Madhavi Divan, ASG instructed by Samvad Partners. Partners Harish Narasappa and Arjun Krishnan, along with Senior Associates Suhaas Shenoy, Ankur Singh, and Associate Shourya Bari. .Over a year ago, the Court had granted interim relief to Amazon by staying the investigation. Shortly thereafter, the same relief was granted to Flipkart as well.[Read Judgment]