Preferential treatment case: CCI raids sellers of Amazon, Flipkart

The investigative arm of the Competition Commission of India (CCI) has carried out search-and-seizure operations at multiple premises linked to two sellers of Amazon.com, Inc, in connection with an investigation launched against e-commerce players over preferential treatment, said two people privy to the development.

CCI is assessing the anti-competitive conduct against seven/eight sellers associated with e-commerce players, they said.

The director-general (D-G) of CCI is empowered to carry out searches like other law enforcement agencies in accordance with the direction of the commission.

In the matter, a team of officials from the D-G office, local police, and forensic experts have visited multiple locations in Delhi and Bengaluru. Officials are learnt to have questioned key employees of the seller present at the premises. They are learnt to have also taken possession of certain documents, digital data, servers, etc from the search site, said people in the know.

CCI searches typically continue for three to four days.

According to sources, the raids were conducted on the offices of Cloudtail and Appario, both sellers of e-commerce giant Amazon, as well as the seller offices of Walmart-owned Flipkart.  Without commenting on the specific case, an official said that the competition law provides a very robust framework to assess anti-competitive conduct, which enables CCI to examine, inter alia, instances of preferential treatment by platforms possessing market power and issue suitable remedies to address competition concerns in case the infringement is found to be established.

India’s antitrust body launched raids on the two top domestic sellers of Amazon over accusations of having violated competition laws.

According to sources, the raids are related to a CCI probe ordered in January 2020 on allegations of anti-competitive conduct, such as giving deep discounts on online sales of smartphones and cherry-picking sellers. Other allegations include predatory pricing and exclusive partnerships.

The Confederation of All India Traders (CAIT) - which represents around 70 million traders in the country - has hailed CCI for conducting raids on the offices of Cloudtail and Appario.

“It is a much-awaited welcome step by CCI. This vindicates the substance of various complaints made by CAIT against Amazon and Flipkart,” said CAIT Secretary-General Praveen Khandelwal.

In March this year, CCI cleared Amazon’s proposal to acquire Catamaran Ventures’ entire stake in Prione Business Services (Prione) – a joint venture (JV) between Infosys co-founder N R Narayana Murthy’s Catamaran Ventures and the US-based e-commerce giant.

Prione houses Cloudtail - one of the largest retailers on the e-commerce firm’s Indian platform. Another seller Appario Retail is a subsidiary of Frontizo - a JV between Amazon and Patni Group.

“The role of Murthy should also be investigated while conducting the raid,” said Khandelwal, adding, “CAIT appreciates the action taken by the D-G.”

An email query to Amazon and Flipkart remained unanswered till the time of going to press.

In the context of e-commerce platforms, the concern is that in light of the dual roles performed by them (i.e., role of marketplace, as well as a competitor in the market), they may have the ability, as well as the incentives, to discriminate and leverage.

From a competition law perspective, it is important they remain neutral in their functioning. While some cases have been decided by CCI, many are either under investigation or at inquiry level, said another person.

The nature of data, difficulty in understanding the operation of algorithms, and other complexities means that authorities need to apply new tools and approaches to investigate and inquire into anti-competitive behaviour in digital markets.

Increasingly, data is emerging as an important metric in the assessment of market power, as well as examining conduct, one of the two people cited above explained.

Recently, all employees of Cloudtail and its parent firm Prione Business Services, numbering 1,200, were reportedly being moved to Amazon India, according to sources. The process is expected to be completed by the end of May.

The relationship between Murthy and Amazon founder Jeff Bezos goes back to 2014, when Prione, a 49:51 JV, was formed. In 2019, the JV was restructured after the government stipulated that foreign e-commerce marketplaces cannot sell products of their group companies on their platforms. Following this, Catamaran Ventures increased its stake in Prione to 76 per cent, reducing Amazon Asia’s stake to 24 per cent. A major chunk of Prione’s revenues came from its ownership of Cloudtail - one of the biggest and most profitable retailers on Amazon.

Last year in August, Amazon and Catamaran Ventures ‘mutually decided’ to not continue their JV beyond the end of its current term. The JV, Prione Business Services, which has been running successfully for the past seven years, is up for renewal on May 19. Last year in December, Amazon had said that Prione would be acquired by Amazon, subject to requisite regulatory approvals.

Facing the heat

• Raids linked to CCI’s probe of allegations of anti-competitive conduct against certain sellers
• Allegations include deep discounts on online sales of smartphones, cherry-picking sellers, and predatory pricing
• Trade body CAIT has accused Amazon of flouting FDI policy and other 
• norms, and demanded that top 20 sellers on the platform in last 5 years be properly scanned