The U.S. e-commerce giant Amazon and Walmart’s Flipkart violated local competition laws by giving preference to select sellers on their shopping websites, revealed in an Indian antitrust investigation.
Ecommerce Platform Violating Indian Competition Law
It appears that the Competition Commission of India (CCI) ordered an investigation into Amazon and Flipkart during 2020.
These ecommerce platforms were allegedly promoting certain sellers with which they had business arrangements and giving priority to certain listings.
Further, the CCI investigators said the two companies were found to have created an ecosystem where preferred sellers appeared higher in search results, elbowing out other sellers, in their 1027-page report on Amazon and a separate 1,696-page report on Flipkart, both dated Aug. 9.
Both reports confirmed that “Each of the anti-competitive practices alleged … were investigated and found to be true.”
Adding, “Ordinary sellers remained as mere database entries,” said the two reports in identical conclusions on both companies.
So far, Amazon and Flipkart, as well as the CCI, did not release any comments in this regard.
Earlier, they have denied the wrongdoing and said their practices are in line with Indian laws.
Now these two companies will have to review the report and file any objections before CCI staff decide on any potential fines.
This investigation’s findings are the latest setback for Amazon and Flipkart in the country.
These platforms continue to face criticism for their business practices from smaller retailers.
According to them, their businesses have suffered in recent years due to deep discounts offered online.
This all started when a complaint was filed from Delhi Vyapar Mahasangh, a group of brick-and-mortar retailers.
When it comes to India, Amazon and Flipkart are leading players in the Indian e-retail market.
The Indian e-retail market was estimated to be worth $57-60 billion in 2023, and set to top $160 billion in value by 2028, consultancy firm Bain estimates.
This is not the first time the Federal Trade Commission, the United States, has sued Amazon alleging the company uses “anticompetitive and unfair strategies to illegally maintain its monopoly power”.
In its defense, Amazon stated that the FTC lawsuit is wrongheaded and would hurt consumers by leading to higher prices and slower deliveries.
Amazon, Flipkart Providing Preferential Listing & Deep Discounting
During this probe, Indian investigators raided certain sellers of Amazon and Flipkart following a Reuters investigation in 2021.
Basically, this investigation was based on Amazon internal documents and revealed that the company gave preferential treatment for years to a small group of sellers on its platform, and used them to bypass Indian laws.
Further the report emphasizes that the practice of preferential listings and deep discounting of mobile phones – including selling products below cost price – causes a “catastrophic impact on the existing competition in the market.”
The CCl report on Flipkart said that the preferred sellers were provided various services such as marketing and delivery at a “miniscule cost.”
These sellers were also enabled by Flipkart to sell phones with deep discounts which amounts to “predatory pricing” and forecloses competition, the CCI added.
Both reports confirmed that “The anti-competitive practices are not limited to sales of mobile phones. They are equally prevalent in other categories of goods.”
