• Amazon and Flipkart are accused of violating India's competition laws by giving preferential treatment to select sellers.
• The Competition Commission of India (CCI) found that these practices sidelined other sellers, making them mere database entries.
• The companies have previously denied any wrongdoing and will now review the report before CCI decides on potential fines.
• The findings could lead to stricter regulations and fines, affecting their operations in a market worth billions of dollars.

An antitrust investigation by the Competition Commission of India (CCI) has found that Amazon and Walmart's Flipkart violated local competition laws. The two e-commerce behemoths stand accused of giving preferential treatment to select sellers on their platforms, thereby breaching the principles of fair competition.

The CCI, in 2020, had ordered a probe into the business practices of Amazon and Flipkart following allegations that they were promoting certain sellers with whom they had business arrangements. The investigation was triggered by a complaint from the Delhi Vyapar Mahasangh, an affiliate of the Confederation of All India Traders (CAIT), which represents 80 million retailers across the country.

The investigation's findings, detailed in a 1027-page report on Amazon and a separate 1,696-page report on Flipkart, both dated August 9, reveal that the two companies created an ecosystem where preferred sellers appeared higher in search results, thereby sidelining other sellers.

CCI Investigation Findings

The reports, which are not public and are being reported by Reuters for the first time, stated, Each of the anti-competitive practices alleged ... were investigated and found to be true. The reports further noted that ordinary sellers remained as mere database entries, highlighting the extent of the alleged preferential treatment.

Both Amazon and Flipkart, as well as the CCI, did not immediately respond to Reuters queries. The companies have previously denied any wrongdoing and maintained that their practices are in line with Indian laws. The two companies will now review the report and file any objections before CCI staff decide on any potential fines.

This development is the latest setback for Amazon and Flipkart in a country where they continue to face criticism for their business practices from smaller retailers. These retailers argue that their businesses have suffered in recent years due to the deep discounts offered online by these e-commerce giants.

Implications and Reactions

In a statement to Reuters, CAIT welcomed the CCI investigation findings, saying it would study the reports and escalate the matter with the federal government. This development is significant considering the size of India's e-retail market, which consultancy firm Bain estimates to be worth $57-60 billion in 2023, and set to top $160 billion in value by 2028.

The CCI investigation report on Amazon said preferred sellers on the platform get the advantage in the (online) listing and when a customer searches for any product, his attention is drawn towards those listings. 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.

In the report on Flipkart, the CCI said preferred sellers were provided various services such as marketing and delivery at a miniscule cost. They were also enabled by Flipkart to sell phones with deep discounts which amounts to predatory pricing and forecloses competition, the CCI said.

The allegations against Amazon and Flipkart are not limited to the sales of mobile phones. The anti-competitive practices are prevalent in other categories of goods as well, both reports noted. Despite attempts by Flipkart and Amazon to block the investigation through legal challenges in courts, the Supreme Court in 2021 allowed it to go ahead.

The findings of the CCI investigation could lead to stricter regulations and potential fines for Amazon and Flipkart, affecting their operations in a market that is estimated to be worth billions of dollars in the coming years.

It also exacerbates their ongoing issues with local retailers who allege their practices harm small businesses. The investigation's findings also underscore the need for a level playing field in the e-commerce sector, where small and medium-sized enterprises can compete fairly with the giants. It remains to be seen how Amazon and Flipkart will respond to these findings and what changes they will make to their business practices in India.