SC Raises Concerns Over Flipkart’s Monopoly, Small Players At Risk

The Supreme Court has reportedly said that Flipkart was known for creating monopolies and expressed concern about the survival of smaller players in the market.

A bench of Justices Surya Kant and N Kotiswar Singh appointed an amicus curiae to assist it in the adjudication of the dispute arising out of an National Company Law Appellate Tribunal (NCLAT) order asking the Competition Commission of India (CCI) to initiate probe against Flipkart, a PTI report said.

In legal parlance, an amicus curiae is someone who is not a party to the case but can give information or offer advice to courts. 

The probe pertains to Flipkart’s alleged use of its dominant position, prompting the bench to inform the company’s counsel that it would like to examine the issue of monopoly.

“We want big players to come and invest here but at the same time we are worried about the dragon’s mouth…it is a serious issue and we have to keep the interest of consumers and small players in mind. Some balancing authority is needed,” the bench noted. 

Notably, the bench also pointed out the absence of complainant All India Online Vendors Association (AIOVA) that alleged unfair trade practices by Flipkart. 

Appearing for AIOVA, advocate Udayaditya Banerjee said that the association is likely to be disbanded or it might no longer exist. 

In its defence, the counsel for Flipkart said that the platform helped many small vendors to take their businesses to the national level.

Justice Kant responded that Flipkart offered so much discount that it disrupted the business of small players and the balance of the market. 

Flipkart’s Reverse Flip Amid IPO Plans 

Last month, Flipkart confirmed about shifting its domicile from Singapore to India.

Back then the Walmart-owned company’s spokesperson said that the transition will help Flipkart in contributing to India’s digital economy and entrepreneurship. 

“As a company born and nurtured in India, this transition will further enhance our focus and agility in serving our customers, sellers, partners, and communities to continue contributing to the nation’s growing digital economy and entrepreneurship. We are excited by the opportunities ahead and reaffirm our long-term confidence in India’s future,” the spokesperson had said. 

He mentioned that the move aligns with the company’s “deep and unwavering commitment to India and its remarkable growth”.

It is pertinent to note that Flipkart’s move to shift its domicile from Singapore to Gurugram kicks off the first of the steps needed for the company to hit the initial public offering (IPO) milestone.

The ecommerce major started its IPO dream after parent Walmart last year gave it the go-ahead to list in the next 12-18 months. Subsequently, Flipkart went on to restructure its board and the leadership to make its mega IPO boom.

In the most recent development, at least four executives, including a senior vice president (SVP) and three other vice presidents (VPs) have reportedly stepped down from their positions. 

Flipkart Under CCI’s Lens

The competition watchdog has been cracking down on ecommerce giants like Flipkart and Amazon for alleged anti competitive practices. 

In 2020, CCI ordered a probe against Amazon and Flipkart after receiving complaints from trade body Delhi Vyapar Mahasangh. 

The companies legally challenged the probe multiple times, but SC rejected their pleas to put the investigations on hold in 2021. 

In 2022, the CCI conducted raids at the offices of the sellers of Amazon India and Flipkart. At the time, the watchdog’s investigators reportedly collected emails, documents and data from computers at these premises.

Last year, CCI released its report which found ecommerce giants Amazon and Flipkart guilty of violating competition laws. Both Flipkart and Amazon were found to have flouted antitrust guidelines by giving preference to select sellers on their platforms.

“Each of the anti-competitive practices alleged… were investigated and found to be true… Ordinary sellers remained as mere database entries,” said the CCI report at the time. 

CCI said that preferred sellers on Flipkart were provided various services such as marketing and delivery at a “miniscule cost”. The CCI also said that Flipkart enabled sellers to see phones with a deep discount, which led to predatory pricing.

Last month, the Enforcement Directorate (ED) asked smartphone makers like Apple to share sales data and other documents for its ongoing probe into Amazon and Flipkart. 

The ED is investigating if the ecommerce giants broke Indian laws by controlling inventory and influencing pricing, something foreign-owned platforms aren’t allowed to do under the current rules.