India investigation finds Amazon, Walmart’s Flipkart violated antitrust laws

An Indian antitrust investigation has found that U.S. e-commerce giant Amazon and Walmart-owned Flipkart violated local competition laws by favoring select sellers on their websites, Reuters reported.

In 2020, the Competition Commission of India (CCI) ordered an investigation into Amazon and Flipkart for allegedly promoting certain sellers with whom they had business agreements and prioritising certain offers.

In a 1,027-page report on Amazon and a separate 1,696-page report on Flipkart, both dated August 9, CCI investigators said the two companies had created an ecosystem where preferred sellers appeared higher in search results, crowding out other sellers.

“Each of the alleged anticompetitive practices … was investigated and found to be true,” reads the two reports, which are not public and are being reported by Reuters for the first time.

“Ordinary sellers remained just entries in databases,” we read in both reports, which contained identical conclusions regarding both companies.

Amazon and Flipkart, as well as the CCI, did not immediately respond to Reuters queries. They have previously denied wrongdoing and said their practices were in line with Indian law.

Both companies will now review the report and file any objections before CCI staff decides on any potential fines.

The investigation is yet another setback for Amazon and Flipkart in a country where the companies continue to face criticism for their business practices from smaller retailers who say their business has been hurt in recent years by deep discounts offered online.

The investigation was initiated following a complaint by Delhi Vyapar Mahasangh, an affiliate of the country’s largest trade body, Confederation of All India Traders (CAIT), representing 80 million retailers.

In a statement to Reuters, CAIT welcomed the findings of the CCI investigation, saying it would analyse the reports and “take the matter further” to the federal government.

Amazon and Flipkart are the leading players in the Indian e-commerce market, which is expected to be worth $57-60 billion in 2023 and over $160 billion by 2028, according to consulting firm Bain.

In the United States, the Federal Trade Commission sued Amazon, alleging that the company uses “anticompetitive and unfair strategies to illegally maintain its monopoly position.” Amazon said the FTC lawsuit is flawed and would harm consumers by leading to higher prices and slower deliveries.

PREFERENTIAL LISTING, BIG DISCOUNTS

During the investigation, Indian investigators searched some sellers on Amazon and Flipkart platforms, after a Reuters investigation in 2021 based on internal Amazon documents found that the company had for years given preferential treatment to a small group of sellers on its platform and used them to circumvent Indian regulations.

The company denies any wrongdoing, but the CCI had earlier told an Indian court that a Reuters special report corroborated the evidence it had against Amazon.

The CCI report on Amazon found that preferred sellers on the platform “gain an advantage in (online) offers” and when a customer searches for any product, “their attention is drawn” to those offers.

The practice of preferential offers and deep price reductions on mobile phones — including selling products below purchase price — is causing a “catastrophic impact on existing competition in the market.”

In its report on Flipkart, the CCI found that various services, such as marketing and delivery, were provided to the preferred sellers at a “low cost”. Flipkart also allowed them to sell phones at deep discounts, which amounts to “predatory pricing” and excludes competition, the CCI said.

“Anticompetitive practices are not limited to the sale of mobile phones. They are equally common in other categories of goods,” both reports say.

Flipkart and Amazon tried to block the investigation for months by filing complaints in courts, but in 2021, the Supreme Court allowed it to proceed.

Last month, India’s commerce minister publicly criticized Amazon, saying the company’s investments are often used to cover business losses.

In June last year, Amazon said it would increase its Indian investment to $26 billion by 2030, including in its cloud business. It also plans to export $20 billion worth of goods from India by 2025.

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