The Competition Commission of India (CCI) has ordered investigation against Amazonand Flipkart on complaints of deep discounting practices and tie-ups with preferred sellers.
CCI has found prima facie evidence necessitating a probe by director general (DG)-investigation to look into alleged anti-competition discounts by the two online marketplace platforms. This is on a complaint by Delhi Vyapar Mahasangh regarding the sale of smartphones.
CCI is looking into allegations whether the preferred sellers are an extension of these marketplaces, operating through different ‘proxy’ entities.
The Commission has studied the original and discounted prices for different smartphone brands sold on Flipkart and Amazon and found that certain smartphone brands/models are available at significantly discounted prices on these platforms and sold largely through ‘preferred sellers’.
“Whether the funding of discounts is an element of exclusive tie-ups is a matter that merits investigation,” the CCI order said.
The offline retailers’ body has provided CCI evidence in the form of communication from Flipkart to its sellers stating it would incur a part of the cost during the Big Billion Days sale or Diwali sales. “However, no such opportunity is available to other sellers who are, thus, unable to compete with such preferred sellers,” the Delhi Vyapar Mahasangh has alleged in its complaint.
A similar allegation has been levelled against Amazon, which has preferred sellers on its platform: Cloudtail India — a joint venture between Amazon, Catamaran Ventures, and Appario Retail. “Amazon has its own private label brands, which are sold only through these preferred sellers,” the complaint stated.
The CCI order stated it needs to be investigated whether the alleged exclusive arrangements, deep discounting, and preferential listing by the online platforms are being used as an exclusionary tactic to foreclose competition and resulting in an appreciable adverse effect on competition contravening the provisions of Section 3(1) read with Section 3(4) of the Competition Act.
CCI has directed the DG office to complete the probe within 60 days. “We will get to understand the entire business model of the e-commerce sector through this investigation. This is the first time we are probing an e-commerce company,” Ashok Gupta, chairman, CCI, told Business Standard.
CCI has also said that the exclusive launch of products, coupled with preferential treatment to a few sellers, and the discounting practices create an ecosystem that may lead to “appreciable adverse effect on competition”.
However, CCI has refused to look into the allegation of joint dominance raised by the complainant. “The Commission notes that it is a settled position that the Act does not provide for inquiry into or investigation into the cases of joint/collective dominance as the same is not envisaged by the provisions of the Act.”
The antitrust watchdog has also noted that mobile manufacturing companies such as OnePlus, Oppo, and Samsung have exclusively launched several of their models on Amazon. Similarly, Vivo, Realme, and Xiaomi have exclusively launched several of their models on Flipkart.
In 2018, Flipkart launched 67 mobile phones and Amazon launched 45 exclusively on its platform, the CCI order said.
“It appears that these mobile manufacturers partner e-commerce platforms, and their brands are sold by the platforms’ exclusive sellers,” the order added.
Gupta in a recent address had warned the e-commerce platforms, saying they must set their house in order amid growing concerns from the retail sector over threat to their business operations from technology-driven online market players.
In its study on the e-commerce sector in India launched last week, CCI had raised the issue of deep discounting, saying the marketplace platforms should bring out a clear policy on discounts. This would include the basis of discount rates funded by the platforms for different products or suppliers, and the implications of participation or non-participation in the discount schemes.
The Commission can take also take suo motu action against the companies if it finds them in violation of the Competition Law.
CCI has found prima facie evidence necessitating a probe by director general (DG)-investigation to look into alleged anti-competition discounts by the two online marketplace platforms. This is on a complaint by Delhi Vyapar Mahasangh regarding the sale of smartphones.
CCI is looking into allegations whether the preferred sellers are an extension of these marketplaces, operating through different ‘proxy’ entities.
The Commission has studied the original and discounted prices for different smartphone brands sold on Flipkart and Amazon and found that certain smartphone brands/models are available at significantly discounted prices on these platforms and sold largely through ‘preferred sellers’.
“Whether the funding of discounts is an element of exclusive tie-ups is a matter that merits investigation,” the CCI order said.
The offline retailers’ body has provided CCI evidence in the form of communication from Flipkart to its sellers stating it would incur a part of the cost during the Big Billion Days sale or Diwali sales. “However, no such opportunity is available to other sellers who are, thus, unable to compete with such preferred sellers,” the Delhi Vyapar Mahasangh has alleged in its complaint.
A similar allegation has been levelled against Amazon, which has preferred sellers on its platform: Cloudtail India — a joint venture between Amazon, Catamaran Ventures, and Appario Retail. “Amazon has its own private label brands, which are sold only through these preferred sellers,” the complaint stated.
The CCI order stated it needs to be investigated whether the alleged exclusive arrangements, deep discounting, and preferential listing by the online platforms are being used as an exclusionary tactic to foreclose competition and resulting in an appreciable adverse effect on competition contravening the provisions of Section 3(1) read with Section 3(4) of the Competition Act.
CCI has directed the DG office to complete the probe within 60 days. “We will get to understand the entire business model of the e-commerce sector through this investigation. This is the first time we are probing an e-commerce company,” Ashok Gupta, chairman, CCI, told Business Standard.
CCI has also said that the exclusive launch of products, coupled with preferential treatment to a few sellers, and the discounting practices create an ecosystem that may lead to “appreciable adverse effect on competition”.
However, CCI has refused to look into the allegation of joint dominance raised by the complainant. “The Commission notes that it is a settled position that the Act does not provide for inquiry into or investigation into the cases of joint/collective dominance as the same is not envisaged by the provisions of the Act.”
The antitrust watchdog has also noted that mobile manufacturing companies such as OnePlus, Oppo, and Samsung have exclusively launched several of their models on Amazon. Similarly, Vivo, Realme, and Xiaomi have exclusively launched several of their models on Flipkart.
In 2018, Flipkart launched 67 mobile phones and Amazon launched 45 exclusively on its platform, the CCI order said.
“It appears that these mobile manufacturers partner e-commerce platforms, and their brands are sold by the platforms’ exclusive sellers,” the order added.
Gupta in a recent address had warned the e-commerce platforms, saying they must set their house in order amid growing concerns from the retail sector over threat to their business operations from technology-driven online market players.
In its study on the e-commerce sector in India launched last week, CCI had raised the issue of deep discounting, saying the marketplace platforms should bring out a clear policy on discounts. This would include the basis of discount rates funded by the platforms for different products or suppliers, and the implications of participation or non-participation in the discount schemes.
The Commission can take also take suo motu action against the companies if it finds them in violation of the Competition Law.
No comments:
Post a Comment