Anti Trust Investigation into Amazon and Flipkart : The battle over India’s E-commerce Market

The Indian e-commerce market having a tremendous potential is projected to surpass $160 Billion mark by 2028 from a $57 to $60 Billion mark in 2023. This is a rapidly evolving sector marked by it’s ever evolving nature and intense competition. The Indian e-commerce market is majorly dominated by global giants such as Amazon, Walmart owned Flipkart. As the market is constantly evolving it has faced growing scrutiny from the Competition Commission of India (CCI) over the allegations of Anti-competitive practices. This blog scouts the ongoing antitrust investigations against the tech giants namely Amazon and Flipkart, delving into the legal and regulatory framework, and evaluating the potential implication that it have over the e-commerce landscape in India.

The Rise of E-commerce in India

The Indian e-commerce market is projected to grow at a compound annual growth rate (CAGR) of 18.2% between 2021 to 2025 and the online grocery market is expected to grow at a CAGR of 33%. In the year 2025 the user penetration is expected to be 18.9% and is expected to hit 25.5% by 2029. Some of the major growth drivers for the Indian e-commerce market are the Digital India Campaign that has expanded the internet connections across India covering and connecting almost entire country. Then we have the development of efficient logistics and supply chain networks. And for this purpose the Indian government is trying to build roads and proper infrastructure to boast the Indian e-commerce market. India has an approximate network of over 6,617,100 km of road making it the largest road network in the World. The numbers speaks for itself. And next we have the Government Initiatives such as National Logistics Policy, Atal Innovation Mission and Startup India.

The e-commerce market in India is majorly dominated by fashion and accessories category. Having over 821 Million users, India was the second largest internet market in world with 117.6 Billion UPI Transactions in year 2023. And in the Fiscal Year 2024 major Tech giants including Google, Meta, Amazon and Flipkart generated over 60,000 crore Rupees in advertising revenue a huge 9% increase from Rs 55,053 crore in the year 2023.

Allegations and Concern

The CCI has accused Amazon and Flipkart with smartphone makers Samsung, Xiaomi, Motorola, Vivi, Lenovo, Realme and OnePlus for exclusively launching the products and breaking the law. These smartphone companies colluded with amazon and flipkart to exclusively launch products on the e-commerce firms. And in the realm of the situation the Competition Commission of India conducted an antitrust investigation against amazon and flipkart and found that they were violating the local competition laws by giving preference to selected sellers, prioritising certain listings and giving high discounts on products hurting other companies. While conducting the investigation CCI prepared a 1,027 page report on Amazon and said that Indian units of five companies – Samsung, Xiaomi, Motorola, Realme and OnePlus were “involved in the practice of exclusive”  phone launches in ”collusion” with Amazon breaking the competition law.

In the case of Flipkart CCI prepared a 1,696 page report that said Indian units of Samsung, Xiaomi, Motorola, Vivo, Lenovo, and Realme conducted the similar practice.

There have been no comments from any side including Amazon, Flipkart and the CCI. But CCI’s report said that Amazon and Flipkart “Deliberately Downplayed” and concluded that the practices were found to be “Rampant”.

If we talk about the major dominant players in smartphone industry in India then only Samsung a Korean Brand and Xiaomi a Chinese brand are two of Indias biggest smartphone players holding an almost 36% market share with China’s Vivo on 19%.

The CCI has also accused both the companies of using their foreign investments in providing subsidized rates for services like warehousing and marketing to select a number of sellers.

The CCI will be reviewing objections to it’s findings from Amazon, Flipkart, The retailer Association and the above mentioned smartphone companies and could penalise heavy fines upon them and will call for changing their business practices in India.

One of the firms in India named Datum Intelligence estimates that 50% of phone sales were made through online platforms last year making a huge increase from 14.5% in 2013. Flipkart had a 55% share in online phone sales in 2023 and Amazon at 35%.

Anti Trust Investigation
[Image Sources: Shutterstock]

Competition Commission of India (CCI) Investigations

The CCI, established under the Competition Act 2002, it is the primary regulatory authority tasked with ensuring fair competition in Indian markets. In year 2020 CCI started probing into Amazon and Flipkart based on certain complaints from trade bodies like the Confederation of All India Trade (CAIT) .

Now let’s have a look at the scope of  the investigation conducted by CCI-

The CCI’s investigation focused on examining the exclusive agreements between the e-commerce platforms and sellers in India. Next is evaluating the probable abuse of Dominant position in the markets. And lastly accessing the impact of pricing strategies on small and medium sized enterprises (SME’s).

The key provisions around which the whole investigation revolved included Section 3 that prohibits agreements that adversely affect competition, such as exclusive supply and pricing agreements or in short Anti-Competitive Agreements are covered in this section.    

And section 4 that states the abuse of dominance or targets abuse of dominant positions, including predatory prices and denial of market access. As the Amazon and Flipkart can be said to have abused their dominant market presence in the e-commerce sector in India.

Implications for Stakeholders

  • First comes the small retailers and sellers. The allegations have highlighted the challenges that are being faced by the small retailers while competing with highly funded tech giants. The investigations report could result in a more stricter rules and regulations that could further ensure a level playing field for everyone.
  • Next we have the backbone of any industry that is the customers. An initial discounts, offers and convenience may have benefitted the customers but further the concerns regarding  monopolization could lead to reduced choices and higher prices in the long run.
  • And at last the policy and regulations. The current case underscores a need for a robust e-commerce policies that could address issues like data privacy, algorithm transparency, and seller protection.

We can further look at one of the most recent cases of CCI penalising Meta or particularly the WhatsApp of Rs 213.14 Crore for using it’s dominant position in the Indian markets after WhatsApp’s privacy policy update that was on a “Take-it-or-leave-it” basis. The users were left only with two choices either to accept the terms and conditions and other one is to reject them. So if a customer accepts the privacy policy then he’ll be able to use the WhatsApp but his data, conversations and everything will be saved and shared to all the subsidiaries of Meta. But if the customer rejects the privacy update then he will not be able to use the WhatsApp. So the absence of free will here from the side of users was marked to be the main reason for CCI” probe.

Potential Outcomes

If the Competition Commission of India (CCI) finds Amazon and Flipkart in violation Act of 2002, significant penalties can be imposed. The fines could amount to a substantial percentage of the companies average turnover over the preceding three financial years ass prescribed under section 27 of the Act.

Such penalties are intended to deter anti-competitive behaviour and should ensure future compliance. In similar global cases fines have reached to billions of dollars, signalling the seriousness of the issue.

Mandated changes to business practices

The CCI might require Amazon and Flipkart to make amendments in their existing business models and policies to foster fair competition. These changes could include

Prohibition of Exclusive Agreements : The platforms may be barred from entering into exclusive arrangements with sellers or their brands. So this will allow a more diverse range of sellers and products on many multiple platforms while promoting wider market access.

Algorithm transparency : because of the current scenario Amazon and Flipkart might be compelled to disclose how their algorithms rank products, ensuring they do not unfairly favour affiliated or preferred sellers. Transparency would therefore enable better trust among stakeholders and will help smaller sellers compete on the same base.

Equal access for all sellers : New policies can be implemented and introduced mandating equal access to marketplace features like visibility in search results, promotional tools and customer outreach

Introduction of New E-Commerce Regulations

The outcome of the CCI’s investigation could also serve as a trigger which will result in formulating new e-commerce laws in India and those regulations might include-

Data privacy and usage: There could be a stricter control on how the data of customers are collected and are utilized by e-commerce industry to ensure ethical practices.

Anti Monopoly Safeguards: It could include legal provisions to prevent monopolization by major player or tech giants, fostering competition and innovation.

Air Pricing Mechanism: A dedicated frameworks should be implemented to prevent predatory pricing practices, protecting the interests of small business in India.

Periodically Auditing and Monitoring: Establishes mechanism for regular audits to monitor compliance with competition laws and to detect any violations on a proactive basis.

The anti-trust investigations into Amazon and Flipkart is one of the very important and landmark case which have the potential to mark a new turning point in India’s e-commerce sector, innovation, consumer benefits, and competition demand a very complex balance requiring a careful consideration. The outcomes of these investigative reports or processes will shape the future of e-commerce in India and also should set precedent for global markets. Transparency, accountability and fairness

would be climacteric to foster a sustainable digital economy.

Author: Shivendra Singh, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at Khurana & Khurana, Advocates and IP Attorney.

  • References –
  • Competition Act ,2002
  • Confederation of All India Traders (CAIT) reports
  • Reuters: India Antitrust Body Probes Amazon and Flipkart
  • The Economic Times: Amazon, Flipkart Face CCI Scrutiny
  • The Mint
  • Ministry of Commerce and Industry , Government of India Reports
  • Outlook Business
  • gov online guide for e-commerce

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