Amazon & Flipkart under the scanner of fair market watchdog, Competition Commission of India
Deep discounting is a major concern for other players.
In a major setback to e-commerce giant Amazon ahead of its global CEO Jeff Bezos' India visit, fair market watchdog Competition Commission of India (CCI) has ordered an enquiry into the operations of both Amazon and Flipkart on multiple counts, including deep discounts and exclusive tie-up with preferred sellers.
The CCI has launched an investigation to find out if the exclusive arrangements, deep discounting and preferential listing by e-commerce marketplaces like Amazon and Flipkart for mobile phones are causing an adverse effect on competition. The CCI on Monday passed directions for investigation under Section 26(1) of the Competition Act, 2002. The order was passed by Ashok Kumar Gupta, chairman, Sangeeta Verma and Bhagwant Singh Bishnoi, both members.
In an 11-page order, the CCI observed that the exclusive arrangements between smartphone/mobile phone brands and e-commerce platform/select sellers selling exclusively on either of the platforms, coupled with the allegation of linkages between these preferred sellers and e-commerce companies merits an investigation.
The CCI noted that though these platforms are used for selling various categories of products, for some categories the online channel constitutes a predominant channel of distribution. Smartphones are one such category of product. The Informant has claimed that Amazon and Flipkart had 36 per cent and 53 per cent market share, respectively, in the market for smartphones sold on online marketplaces in India in the first quarter of the year 2019.
On careful perusal of allegations levelled by the Informant and the documents provided, the Commission noted that there are four alleged practices on the marketplaces, namely, the exclusive launch of mobile phones, preferred sellers on the marketplaces, deep discounting and preferential listing/promotion of private labels.
The first issue under examination is that of the exclusive launch of mobile phones on the two major e-commerce platforms. The Informant has provided a list of phones which were exclusively launched on the platforms. The Informant has provided the following evidence in the form of text messages to indicate that due to partnership between the mobile manufacturer (Vivo Z1x and Vivo U10 models) and platforms (Flipkart and Amazon), offline retailers are forced to purchase smartphones either from manufacturers' e-stores or from the platforms e-portals.
The Commission has also noted several reports in the media as well as advertisements by e-commerce portals regarding exclusive launches. Mobile manufacturing companies like One Plus, OPPO, and Samsung have exclusively launched several of their models on Amazon. Similarly, Vivo, Realme, Xiaomi etc., have exclusively launched several of their models on Flipkart. In 2018, Flipkart launched 67 mobile phones and Amazon launched 45 mobile phones exclusively on its platform. 2 Thus, it appears that these mobile manufacturers partner with the e-commerce platforms and their brands are sold by the platforms' exclusive sellers.
Based on the evidence adduced by the Informant and information available in the public domain, it can be prima facie inferred, CCI said that there appears to be an exclusive partnership between smartphone manufacturers and e-commerce platforms for the exclusive launch of smartphone brands. Thus, exclusive launch coupled with preferential treatment to a few sellers and the discounting practices create an ecosystem that may lead to an appreciable adverse effect on competition, the order said.
*Edited from an IANS report