NCLAT directs CCI to investigate Flipkart for abuse of dominant position

The National Company Law Appellate Tribunal (NCLAT) has directed the Competition Commision of India (CCI) to investigate Flipkart for abuse of dominant position pusuant to a complaint by All India Online Vendors Association. (All India Online Vendors Association vs CCI).Holding that All India Online Vendors Association (Appellant) has made out a prima facie case against Flipkart which required investigation, the NCLAT has ordered,.“The CCI is directed to direct the Director General to cause an investigation to be made into the matter considering the information submitted by the Appellant and observations made by us in the present Judgement.”NCLAT.The NCLAT, therefore, set aside the CCI order closing the complaint in terms of Section 26(2) of the Competition Act after holding that no case of contravention of Section 4 was made out. .The order was passed by a three-member Bench of Chairperson, Justice SJ Mukhopadhaya; Member (Judicial), Justice AIS Cheema and Member (Technical) Kanthi Narahari..The Appellant had submitted information under Section 19(1)(a) of the Competition Act, 2002 against Flipkart India Private Limited and Flipkart Internet Private Limited, inter alia, alleging contravention of provisions of Section 4 of the Act..The Appellant claimed that Flipkart India sold goods to vendors owned by Flipkart Internet on discounted price and thereafter, products were sold on the platform operated by Flipkart Internet ie. Flipkart.com..According to the Appellant, this amounted to abuse of dominant position..CCI considered the complaint and observed that the Appellant had not given any credible source for the market share data to claim that Flipkart held over 40% market share and concluded that the matter deserved to be closed at the stage of Section 26(1)..After considering the averments made by the parties, the NCLAT observed that the only question which was required to be looked into by CCI under Section 19(1)(a) read with Section 26(1) was whether a prima facie case of contravention of Section 4 of the Act was made out..In their defence, Flipkart India and Flipkart Internet relied on an order passed by the Income Tax Appellate Tribunal, Bangalore in Flipkart India Private Limited Vs. Assistant Commissioner of Income-Tax which had held that parties purchasing products from Flipkart India were unrelated third parties..It was also argued that Flipkart India had a miniscule position in business to business market and could not act independent of market forces..The NCLAT perused the ITAT order and stated that although the order pertained to the provisions of the Income Tax Act, 1961, it showed the manner in which Flipkart India was “operating in the market and predatory pricing was resorted to”..Stating that the facts recorded by Assessing Officer regarding the manner in which the two entities were operating was material, the NCLAT said,“The Order also shows that OP1 (Flipkart India) was selling goods to retail sellers like, WS Retail Services Private Limited and others who subsequently, would sell their goods as sellers on internet platform under the name Flipkart.com, i.e. (Flipkart Internet). The Appellant has rightly pointed out there is a link between what OP1 and OP2 were doing. Predatory pricing by OP1 is also pointed out.”.The NCLAT thus opined,.“The conclusions drawn to impose tax may have been set aside by ITAT; but the facts noticed do make out a prima facie case to have a look under the Competition Act. These were actions by Government Authorities. What happened ultimately in the Appeal before ITAT is not material as far as the issues which are for our consideration.”NCLAT.In view of the above, the NCLAT concluded that the Appellant had made out a prima facie case which required CCI to direct the Director General to cause an investigation in the matter..Th CCI order was accordingly set aside and the matter was remanded back to the CCI..The Appellant was represented by Advocate Chanakya Basa..Flipkart was represented by Senior Advocate Amit Sibal with Advocate Rajshekhar Rao along with Shardul Amarchand Mangaldas lawyers Yaman Verma, Neetu Ahlawat, Sonali Charak, Chaitanya Puri, Saksham Dhingra, Areeb Y Amanullah..Read the Order: