Amazon, Flipkart Manipulating Market In Cohort With ‘Selected’ Vendors? Govt Will Investigate Ecommerce Manipulation

The investigative wing of antitrust watchdog, Competition Commission of India (CCI) is reviewing documents that imply the presence of a nexus between leading e-commerce firms and their “preferred sellers”.

They found these documents during raids conducted in April, which were carried out after Amazon and Flipkart were accused of violating competition law.

It also seized digital data, servers, among other items, during the raids. 

More Time Sought

The director general’s office was scheduled to complete its investigation by the first week of June.

However, it has now requested more time since “some important data” seized during the raids is yet to be analysed.

These could be pertaining to ‘financial linkages’ between the platforms and the online vendors.

Preferential Treatment

The focus of CCI’s probe is deep-discounting and instances of e-commerce companies owning a stake in vendors.

In 2020, the Delhi Vyapar Mahasangh (DVM) had approached the CCI alleging that Flipkart and Amazon were abusing their market dominance.

DVM represents small and medium businesses.

It said that e-commerce platforms have arrangements in place in which it provides certain “preferred sellers” exclusive partnerships and promotions, negatively impacting the “non-preferred” sellers.

Alleged Misdeeds

To sum it up, there are four alleged anti-competitive practices: 

• Exclusive launch of mobile phones 
• Promoting preferred sellers
• Deep discounting
• Prioritising some seller listings over others

Owning Stakes In Vendors

Such platforms are also accused of owning stakes in some of their online vendors which is prohibited under the foreign investment rules for e-commerce.

CCI is examining the terms of such equity investments.

A Reuters report discovered that more than 35% of Amazon India’s sales in early 2019 came from just two sellers – Appario and Cloudtail.

This means that some 35 of Amazon’s more than 400,000 sellers in India at the time accounted for around two-thirds of its online sales.

Fruits Of Joint Ventures

Cloudtail is the result of a joint venture between Amazon and Infosys founder N.R. Narayana Murthy.

The seller began offering goods on Amazon.in after it was set up in August 2014.

Appario sprang from another joint venture between Amazon and an entity backed by the family of Ashok Patni, a pioneer in the Indian IT outsourcing sector, in 2017.

Amazon had an indirect equity stake in both these sellers, who were also raided by the CCI last month.

It has been indulging in this practice for years and to avoid scrutiny, it publicly misrepresented its ties with the sellers and used them to circumvent increasingly tough regulatory restrictions.

Claim Vs Proof

The company says it runs a transparent online marketplace and treats all sellers equally.

Documents revealing how it helped a select few sellers prosper by giving them discounted fees and helping cut special deals with big tech manufacturers such as Apple contradict that claim.

Such deals gave these sellers exclusive rights to sell their smartphones..

This was mutually beneficial since the tech firms got a large sales channel and Cloudtail got premium products to list.

All these findings come from drafts of meeting notes, PowerPoint slides, business reports and emails.