The Karnataka High Court vide its order dated June 11, 2021 dismissed the writ petitions filed by Amazon Seller Services Private Limited and Flipkart Internet Private Limited against the Competition Commission of India (“CCI”).

Background:

The Delhi Vyapar Mahasangh (“Informant”) had filed an information before the Competition Commission of India against Amazon Seller Services Private Limited and Flipkart Internet Private Limited, under Section 19(1)(a) of the Competition Act, 2002 (“Act”), alleging contravention of Section 3(1) read with Section 3(4) and Section 4(1) read with Section 4(2) of the Act. The Informant inter-alia alleged that the companies had entered into several vertical agreements with preferred sellers and following aspects require investigation and consideration by the Commission:

• Deep discounting;

• Preferential Listing; and

• Exclusive Tie-ups.

The Commission vide order dated January 13, 2020 held that Act does not provide for an enquiry or investigation in cases of joint/ collective dominance and directed investigation under Section 26(1) of the Act by the Director General for alleged violation of Section 3(1) read with Section 3(4) of the Act.

The order dated January 13, 2020 (“impugned order”) was challenged by both Amazon Seller Services Private Limited and Flipkart Internet Private Limited before the High Court of Karnataka.

Issues framed by the High Court:

The Karnataka High Court, after hearing various objections of the parties framed the following issues:

1. What is the nature of the impugned order passed under Section 26(1) of the Act?
2. Whether a prior notice and opportunity of hearing is mandatory at the stage of issuing direction to the Director General to hold inquiry under Section 26(1) of the Act?
3. Whether the impugned order calls for interference?

Findings of the High Court:

The Karnataka High Court after considering the judgments passed by the Supreme Court in CCI v. SAIL, [(2010) 10 SCC 744] and CCI v. Bharathi Airtel, [(2019) 2 SCC 521], held as under:

“Thus, from the above authorities, it is clear that:

• An order under Section 26(1) of the Act passed by the Commission is an 'administrative direction' to one of its wings departmentally and without entering upon any adjudicatory process; and

• Section 26(1) of the Act does not mention about issuance of any notice to any party before or at the time of formation of an opinion by the Commission on the basis of information received by it. Accordingly, Points A and B are answered.”

The Karnataka High Court after considering the various judgments, answered issue c. as under:

“It is expected that an order directing investigation be supported by 'some reasoning' (CCI Vs. SAIL para 97), which the Commission has fulfilled. Therefore, it would be unwise to prejudge the issues raised by the petitioners in these writ petitions at this stage and scuttle the investigation. Therefore, the impugned order does not call for any interference. Accordingly, point (c) is answered.”

The writ petitions were accordingly dismissed.

Please find attached a copy of the order.

This update has been contributed by R. Sudhinder (Senior Partner) and Prerana Amitabh (Counsel).

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