Amazon heralded a revival in India’s online market after months of lockdown with robust sales during its Prime Day events. Barely has the euphoria died down when the company is facing the heat from an antitrust move in India.
The complainants this time are a group of online traders who came together to form a trade body, and approached the Competition Commission of India (CCI) seeking redress on the matter. Amazon is already facing the heat from lawmakers in the US as well as in Europe and Canada for alleged preferential treatment to vendors.
The group of more than 2,000 online sellers filed the antitrust case against Amazon with the CCI claiming that the tech and retail giant was favouring some retailers whose online discounts had the potential to drive other vendors out of business, a report by wire agency Reuters said.
The company, which pledged over $6.5 billion to growing its India operations that includes the setting up of its largest office in the world at Hyderabad, has been facing legal obstacles since the start of 2020. The CCI had ordered a probe into Amazon and Walmart-owned Flipkart in January on alleged violation of the competition law to implement discounting practices.
What’s the complaint about?
The latest suit with the CCI involves the All India Online Vendors Association (AIOVA), which is a grouping of online retailers that largely sell to Amazon and Flipkart. However, it is not clear if these retailers also form part of the vendor network of Jio Platforms, a fully-owned subsidiary of India’s largest business group Reliance Industries.
The antitrust suit, filed earlier this month with the CCI, alleges that Amazon India buys goods in bulk from manufacturers and sells them at discounted prices to sellers such as Cloudtail and Appario, which then offer discounts to consumers on the Amazon platform.
The complaint alleged that such an anti-competitive arrangement was driving independent sellers out of business.
What does it mean?
The filing would now be reviewed by the CCI to see whether a broader investigation could be launched or to dismiss it outright.
The petitioners were also concerned about Amazon’s use of its private labels such as Solimo and Presto to undercut sellers on its platform. Amazon India, which had reported revenues of $1.5 billion for the fiscal year 2019, according to a report by ET, need not respond till such time as the CCI decides on the next course of action.
The CCI is a statutory body under the federal government that is responsible for enforcing India’s Competition Act of 2002 across the country to prevent activities that could have an adverse effect on competition. The body came into existence in October 2003 with India’s Supreme Court clarifying in a subsequent judgment that its job was to promote economic efficiency using competition as one of the means. From time to time it reviews and approves deals, as it did when Facebook pumped up investments into Reliance Jio Platforms.
Amazon, Flipkart faced antitrust before too
This is not the first time that Amazon and Flipkart have faced the ire of local eCommerce startups as well as mom-and-pop stores, who have claimed that by undercutting prices, these large online retailers were virtually shutting down their business.
In January, CCI had ordered an investigation into antitrust violations by Amazon and Flipkart, but the probe was put on hold through a judgment by the Karnataka High Court with Amazon arguing that the statutory anti-competition body did not have sufficient evidence for the probe. The case coincided with Amazon CEO Jeff Bezos high profile visit to India, where he set aside $1 billion to expand the company’s business.
While the federal government had rolled out the red carpet for such high profile visits earlier as in the case of CEOs of Facebook, Microsoft and Google, the Amazon boss was largely ignored by New Delhi. A prime reason ascribed for the cold shoulder was the criticism of Prime Minister Narendra Modi’s policies by Washington Post, a publication owned by the Amazon boss.
There were a few murmurs about the proximity of the Reliance Group to the ruling political formation in New Delhi though it died down almost instantly. Since then, Reliance has raised a whopping $15 billion in investments and grown its digital retail business via Jio Platforms.
The federal government also brought out a new eCommerce policy draft that could force the big online retailers to share their source codes and algorithms with enforcement officials as part of regulatory efforts to sustain competition by thwarting digitally induced biases.
With all of these issues at hand, the antitrust filing with the CCI could only be a storm in the teacup.