CASE ANALYSIS

IN RE: DELHI VYAPAR MAHASANGH

Vs.

FLIPKART & Anr.

By:
Tarun Tyagi1
BBA LL.B 3rd Year 2020-2025
School of Law, Delhi Metropolitan Education

Guru Gobind Singh Indraprastha University, New Delhi

1 This paper is the original work of the author and contains no copyrighted material that has not been properly
attributed or obtained permission to use. The authors take full responsibility for any issues related to copyright
infringement that may arise from the use of the materials presented in this paper. All sources of information
have been properly cited in accordance with the guidelines of the referencing style used in this paper. Any
opinions, findings, and conclusions expressed in this paper are those of the authors and do not necessarily reflect
the views of the institutions they are affiliated with.
 IN RE: DELHI VYAPAR MAHASANGH Vs. FLIPKART & Anr.

Informant: Delhi Vyapar Mahasangh(hereinafter referred as

DVM)
Opposite Party/ies:
1. Flipkart Internet Private Limited and its affiliated entities
2. Amazon Seller Services Private Limited and its affiliated entities
(hereinafter referred as OP-Opposite Parties)
Citation: CCI/40/2019
Decided On:13.01.2020
Coram: Hon’ble Mr Ashok Kumar Gupta, Chairperson, Ms
Sangeeta Verma, Member, Mr Bhagwant Singh Bishnoi, Member
Decision Ratio: 3:0
Decisive Opinion: Hon’ble Mr Ashok Kumar Gupta, Chairperson
Majority: Hon’ble Mr Ashok Kumar Gupta, Chairperson, Ms
Sangeeta Verma, Member, Mr Bhagwant Singh Bishnoi, Member
Dissent: None

ABSTRACT

DVM Judgement is a very recent and landmark decision of CCI, a regulatory body, underling
its power and ability to defend competition act, 2002 in the face of e-commerce behemoths like
Flipkart & Amazon who collectively accounts for 89 per cent market share. This case is more
famously known as a fight for the exclusivity of OnePlus2 involving allegations of violations of
Competition Act at the behest of information received from DVM by Amazon and Flipkart
which involved deep discounting and exclusive tie-ups between online retailers and certain
sellers leading adverse appreciable effect on competition (AAEC)3. Based on the prima facie
review of the violations CCI decided to order a comprehensive investigation by Director

2A Smartphone brand & a subsidiary of Oppo Mobile Telecommunication Corp. Ltd.

3
AAEC refers to an instance where it is believed that a specific business practise or market environment
severely harms or limits competition in a market or industry.
General upholding basic principles of competition law and ensuring a level playing field for
all market players.

BACKGROUND
The emergence of technology infrastructure like Internet has undoubtedly facilitated the growth
of e-commerce platforms leading to creation of industry behemoths like Amazon & Flipkart
who has revolutionized the retail industry by allowing the third-party seller to reach wider
audience and sell their products online however this newfound power has brought upon some
unfair manoeuvres played by these platforms to gain inequitable leverage over the traditional
sellers of brick & mortar by allowing deep discounting and exclusivity tie-ups which are in
teeth of competition law of the state.

The present case follows a similar pattern, wherein informant 4, a trader’s association
representing small & medium sized business in Delhi had approached the Hon’ble Delhi High
Court alleging unfair trade practices by the opposite parties leading to dubious advantage to
sellers of online marketplace leaving traditional sellers of brick and mortar as straggler facing
unfair competition. The Hon’ble Court dismissed that petition on the ground that informant
had no locus standi to file that petition as it was not a representative body recognized under the
Consumer Protection Act & it has failed to provide concrete evidence of the alleged violation.

Thereafter the informant approached NCLAT for relief against the High Court’s order and
NCLAT ordered to revive the petition of informant in 2019 and directed CCI to conduct an
investigation into the anti-competitive practices of opposite parties.

Matter came before CCI.

FACTS
DVM under section 19(1)(a) informed CCI of the alleged contraventions of section 3(4) read
with section 3(1) and section 4(2) read with section 4(1) by Opposite Parties. The informant
alleged the following:

4 a society registered under the Societies Registration Act, 1860

 1. DVM, the informant represents the interest of its members which comprises of micro,
small & medium scale traders who regularly list smartphones for sale on e-commerce
platforms to get benefitted from the online distribution channel. These platform
includes Flipkart & Amazon both having their registered office in Bengaluru. These
platforms facilitate the third party sellers like informant to sell their goods to consumer
online.
2. Informant alleges that OPs are in clear violation of s.3(4) r/w s.3(1) as there exists
vertical agreements 5 between these platforms and their preferred sellers, which are
directly or indirectly controlled by them only and leads to foreclosure of non-preferred
sellers. This also results in influencing to sellers prices by discounts and private labels
on B2B levels. OPs gather the user preferences and related data & uses them for unfair
advantage.
1.2.1. Deep Discounting
Informant alleges that Flipkart engages in deep discounting with its preferred
sellers by incurring a part of cost during the Big Billion Days sales of Diwali sales,
interestingly it is no available to other sellers. Similarly Amazon has preferred
sellers like Cloudtail India & Appario Retail who are being preferred in selling of
private labels.
1.2.2. Preferential Listing
Both Flipkart & Amazon uses “Assured Seller” & “Fulfilled” word respectively
for their preferred sellers which result in listing earlier or at the start only on the
search results. For e.g. Vision Star, Flash Star Commerce, Cloudtail & Appario
1.2.3. Exclusive Tie-ups & Private Labels
Informant states that Both OPs have arrangements as in tie-ups for private labels
sold only through preferential sellers creating huge impact on other sellers.

3. Informant alleges that OPs are in clear violation of Sections 4(2)(a)(ii); 4(2)(b)(ii) and
4(2)(c) as they collectively account for more than 89 percent market share and leverage it
to facilitate predatory pricing for their preferred sellers, they use the huge repositories of
data to help their preferred seller get an advantage over the non-preferred seller and
unilaterally terminates the agreements with sellers.

5 Agreements among businesses operating at different levels of supply chain.

4. Therefore on the above allegations the informant exhibits the inherently anti-competitive
model of these platforms and prays for direction of cease and desist from anti-competitive
practices and a maximum penalty to be imposed in accordance with section 27.

ISSUES

a) Whether there in no uncertain terms exists a prima facie case of

contraventions of provision of the Competition act, in opinion of the
commission requiring it to order an inquiry under section 26 r/w
section19?

ARGUMENTS
I. Informant
The informant argued the following:

a. According to the Informant, vertical agreements between Flipkart and Amazon

and their preferred vendors contravene Section 3(4) read in conjunction with
Section 3(1) of the Act.
b. The chosen sellers are thought to be directly or indirectly connected to or under
the influence of Flipkart/Amazon, which results in the foreclosure of other non-
preferred sellers.
c. At the B2B level, the platforms have the power to affect seller prices, offer
discounts, and stock in the form of private brands.
d. The omnibus clause in Section 3(1) of the Act is violated by the
agreements/arrangements between Amazon and its vendors and Flipkart and its
sellers.
e. Deep discounting, preferred listing, exclusive tie-ups, and private labels are just
a few of the anti-competitive tactics used by the OPs.
f. Due to these practises, new entrants face significant entry barriers and high
capital costs as well as the exclusion of other rivals from the market.
 g. Unreasonable vertical limitations result from the OPs' capacity to unilaterally
and without cause cancel their contracts with non-preferred sellers.

II. Opposite Parties

In primary hearing of order of investigation under section 26 no opportunity is given to the
opposite parties as it is for a formation of a prima facie opinion on contravention however after
the order of investigation under Director General OPs are allowed to present their defence.

DECISION
CCI after careful perusal of the facts jotted down the plea of informant into four parts to form
an opinion on order of investigation by DG u/s 26.

A. Exclusive Launch of Mobile Phones

The Commission has taken note of media stories and promotions regarding exclusive
releases by cellphone manufacturers such One Plus, OPPO, Samsung, Vivo, Realme,
and Xiomi on Amazon and Flipkart, and the informant has provided proof in the form
of text messages. It appears that these mobile manufacturers collaborate with the e-
commerce platforms, and that the platforms are the only places where their brands are
offered for sale.

B. Preferred Sellers on the Marketplace

According to the DMV, Amazon and Flipkart favour vendors that have ties to the
platforms. Only a few websites sell cellphones that have been exclusively released, and
evidence points to a collaboration between smartphone makers and e-commerce sites
for exclusive debuts. This exclusive launch, in addition to giving some merchants
preferential treatment and engaging in discounted tactics, could have a severe effect on
competition.

C. Deep Discounting
 Emails purportedly sent by Amazon and Flipkart to their vendors in order to provide
discounts on major sales occasions like the Big Billion Days and the Great Indian
Festival have been made available by the Informant. both preferred vendors are
believed to be affiliated with Amazon and Flipkart, respectively, through common
shareholders, directors, and other stakeholders. They are also alleged to be conducting
business through several "proxy" businesses that have been granted the backing of both
online marketplaces. The Commission has noted that some smartphone brands/models
are offered on these platforms at sharply reduced prices and are primarily sold by the
designated favoured sellers. It is being looked at if financing of discounts is a
component of the exclusive tie-ups.

D. Preferential Listing/Promotion of Private Labels

Investigations into the claims of preferential listing and steep discounts by e-commerce
platforms are necessary since they might have a negative impact on competition.
Investigations should be conducted into the exclusive contracts that exist between
smartphone manufacturers and e-commerce platforms as well as the purported
connections between favoured merchants and the platforms. It must be investigated to
see if these actions constitute an attempt to stifle competition and a violation of the
Competition Act's rules.
After careful perusal on the above reasoning the hon’ble CCI insofar directed that there do
seems to exists contravention of the act requiring investigation u/s 26 by DG which was
accordingly directed.

ANALYSIS
In an apparent review it can be jotted down that allegations again these e-commerce behemoths
appear to be severe and supported by evidence makes them sufficient to be prosecuted in
accordance with section 3 & 4 of the Act. The ultimate cause of concern had been the special
treatment and deep discounting followed to remove completion and destroy the level-playing
field for the other traders in the market. Amazon and Flipkart need a justifiable foundation for
their steep discounts, in contrast to Walmart, which adheres to the notion of bulk purchasing to
save costs. They could adhere the argument of user review based ranking of sellers which could
not have been altered.
The Story After that
In June 2020 Amazon & Flipkart had approached Karnatka High Court through a writ petition
challenging the order of CCI, the hon’ble ordered a stay on the proceeding of investigation by
CCI in July. In August 2020, the informant approached Hon’ble top Court challenging the
order of stay by Karnataka high Court, the Supreme overturned the high Court’s order and
paved the way for investigation by CCI. In June 2021, the CCI submitted its report of
investigation into Flipkart and Amazon business practices and recommended a penalty.
Thereafter time to respond to opposite parties was given in the mean while Hon’ble top court
in September 2021 reiterated that investigation would proceed and it’s still going on.