The Competition Commission of India (CCI) has ordered a probe into alleged malpractices of e-commerce giants Flipkart and Amazon for including deep discounting and tie-ups with preferred sellers.

The order follows a complaint filed by Delhi Vyapar Mahasangh, whose members comprise many traders.

“The Commission observes that the exclusive arrangements between smartphone/mobile phone brands and e-commerce platform/select sellers selling exclusively on either of the platforms, as demonstrated in the information, coupled with the allegation of linkages between these preferred sellers and OPs (opposite parties) alleged by the Informant merits an investigation,” the CCI said in an order.

It needs to be investigated whether the alleged exclusive arrangements, deep discounting and preferential listing by the OPs are being used as an exclusionary tactic to foreclose competition and are resulting in an appreciable adverse effect on competition, it added.

In its complaints, the DVS had said that its members comprise many Micro, Small and Medium Enterprises (‘MSME’) traders which rely on the trade of smartphones and related accessories. It is stated that many such traders regularly list their smartphones for sale on online marketplaces to take the benefit of the online distribution channel.

The Informant states that there are instances of several vertical agreements between Flipkart and Amazon and their preferred sellers which have led to the foreclosure of other non-preferred traders or sellers from these online marketplaces. It has been alleged that most of these preferred sellers are affiliated with or controlled by Flipkart or Amazon, either directly or indirectly.

They also said that Amazon and Flipkart are able to cross-subsidise because of the huge amount of funding received from their investors, which has resulted in incentives that allow pricing below cost on their platforms, through their sellers, resulting in the creation of high entry barriers and high capital costs for any new entrant in the market. Resultantly, the existing sellers find it difficult to launch their own portals or marketplaces in order to compete.

The CCI order comes just days before the Amazon founder Jeff Bezos is to arrive in India.

—India Legal Bureau