Anti-competitive Probes Against E-commerce Platforms: A Shift in Regulatory Approach

By Sajith Anjickal, a third-year Student at NLSIU, Bangalore

E-commerce platforms have significantly changed the way in which businesses are conducted. The perceived benefits of e-commerce markets continue to draw in more and more buyers and sellers to transact on online platforms. This change in market dynamics has, however, begun to attract the scrutiny of competition regulators across the world. In certain jurisdictions, like the European Union, reports have been published examining the opportunities and challenges that online markets may present for competition. Regulators in some jurisdictions have also initiated detailed anti-competitive probes against major online platforms.

Earlier this year, the Competition Commission of India (‘Commission’) also published a report identifying certain competition issues/concerns in e-commerce markets. Subsequently, the Commission, in In Re: Delhi Vyapar Mahasangh and Flipkart Internet Pvt Ltd & Anr, ordered an investigation against Amazon and Flipkart (Opposite Parties, ‘OPs’) under section 26(1) of the Competition Act, 2002 (‘Act’) for alleged violation of section 3(1) read with section 3(4) of the Act. This was based on the information that the OPs were allegedly involved in anti-competitive practices such as exclusive agreements, excessive discounts, preferred sellers, and preferential listings. In response, the OPs approached the Karnataka High Court by way of writ petition challenging the Commission’s order. The Court granted an interim stay against the order on multiple grounds, including the Commission’s failure to form a prima facie opinion as to the existence of the alleged anti-competitive agreements. In this piece, I shall demonstrate that the present order of the Commission marks a shift in its regulatory approach towards e-commerce platforms.

Departure from Precedents

With respect to the procedure leading up to the order under section 26(1), it appears that the Commission did not conduct a preliminary conference with the parties. While admittedly the law does not mandate a preliminary hearing to be held, such an opportunity is often provided to parties by the Commission as a matter of practice/norm. In fact, the Commission’s decision to not hold a preliminary hearing is particularly surprising given that it has previously, in similar cases such as In Re: All India Online Vendors Association and Flipkart India Pvt Ltd & Anr (‘AIOVA’), engaged with e-commerce platforms before passing orders under section 26 of the Act. A preliminary conference in the present case would have made the Commission appreciate the issues from the viewpoint of the e-commerce platforms as well. This, in turn, would have led the Commission to consider certain facts capable of affecting its decision to order the investigation. Some of these facts also formed the grounds on which the Karnataka High Court granted the interim stay. For instance, the Commission failed to take note of the fact that the OPs were being investigated by the Enforcement Directorate (‘ED’) under the Foreign Exchange Management Act, 1999. This ongoing investigation becomes relevant in view of the ruling of the Supreme Court in Competition Commission of India v. Bharti Airtel Ltd & Ors. The Supreme Court, in the context of jurisdictional conflicts, held that the jurisdiction of the Commission would be deferred until the specialised regulator takes requisite actions at first instance. Therefore, consideration of the ongoing investigation would have required the Commission to defer its jurisdiction until there are findings returned by the ED.

In directing the investigation in the present order, the Commission observed that exclusive agreements, together with discounts and preferential listing, may have an adverse effect on competition. While making this observation, however, the Commission did not address or acknowledge its observations in prior similar cases. For instance, in In Re: Mohit Manglani and M/S Flipkart India Pvt Ltd & Ors, the informant had alleged that exclusive agreements between manufacturers/suppliers of goods and e-commerce platforms were anti-competitive. The Commission, however, dismissed this allegation noting that such agreements are unlikely to create any barriers to entry or adversely affect existing players. It also went on to highlight the benefits accrued to the consumers by virtue of online distribution platforms. Further, as regards discounting practices, online platforms have often contended that e-commerce is a comparatively nascent mode of retail in India and thus, offering products at discounted prices is essential to attract and retain consumers. This contention had found support from the Commission in In Re: Ashish Ahuja and Snapdeal.com & Anr, wherein it noted that special deals and discounts help e-commerce platforms grow. The premise of the contention, i.e., the nascency of the e-commerce marketplace, was even endorsed recently by the Commission in the AIOVA case. Interestingly, in the AIOVA case, the Commission, highlighting the consumer benefits, efficiencies, and growth potential of the e-commerce model, also observed that e-commerce markets must be regulated in a manner that does not inhibit innovation. Given these prior observations, the Commission’s contrary stance in the present order is telling.

An Overall Shift

The contrary stance in the present order must be viewed in the backdrop of the Commission’s recent orders in In Re: FHRAI and MMT Pvt Ltd & Ors and In Re: Rubtub Solutions Pvt Ltd and MMT Pvt Ltd & Anr. The Commission clubbed these cases and ordered an investigation into allegations regarding the preferential nature of the agreement between MMT-Go and OYO. It also directed an investigation into certain practices such as excessive discounts, noting that the combination of MMT and GoIbibo resulted in dominance in the relevant market. This denotes a significant departure from previous orders of the Commission. For instance, while approving the MMT-Go combination back in 2017, the Commission observed that the proposed combination was not likely to adversely affect competition. Additionally, in In Re: RKG Hospitalities Pvt Ltd and Oravel Stays Pvt Ltd, the Commission, citing the nascent stage of the relevant market, had rejected the charge of abuse of dominance against OYO. It is therefore apparent that the Commission has not had a uniform approach in scrutinizing allegations against e-commerce platforms.

Conclusion

A precedent-based assessment of the Commission’s recent orders (including the present order) indicates a notable shift in its approach towards regulating online platforms. The Commission previously seemed to follow a mild approach while examining the conduct/practices of online platforms. However, considering the market study and the recent orders, it appears that the Commission is moving towards an approach that is being increasingly followed globally, i.e., greater and aggressive regulation of online players. One hopes that the Commission channels its newfound approach into establishing competition jurisprudence that strikes a balance between various interests.

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