The Indian online retail market is all set to witness a legal battle between domestic online vendors and e-commerce giant Flipkart, which was taken over by US-based retail major Walmart last summer. The National Company Law Appellate Tribunal (NCLAT) has admitted an appeal by the All India Online Vendors Association (AIOVA) against an order passed by the Competition Commission of India (CII) giving a clean chit to Flipkart on allegations of indulging in unfair practices using its dominant market position.
The AIOVA, a group of over 2,000 sellers selling on e-commerce marketplaces such as Flipkart, Amazon, Snapdeal etc, had alleged that Flipkart was abusing its market dominance by showing preference to certain vendors.
However, in its order passed in November 2018, the CCI had ruled that after examining the present market construct and structure of online marketplace platforms in India, “it does not appear that any one player in the market is commanding any dominant position at this stage of evolution of market”. The competition watchdog went on to conclude that there was no violation of Section 4 of the Competition Act, which pertains to abuse of dominant market position.
On charges of preferential treatment to Flipkart-owned vendor WS Retail Services Pvt Ltd., the CCI observed that “the Informant itself has admitted... such structural link between [Flipkart Internet Pvt. Ltd.] and WS Retail existed only till 2012. Hence, no such concern is present today. Additionally, Flipkart has pointed out that WS Retail Services Pvt. Ltd. is no longer a seller on the Flipkart Marketplace post 11 April 2017.” New FDI guidelines which kicked in this February put a limit on how much e-commerce companies can source from their own wholesale arms.
The CCI also said that the Flipkart marketplace is required to comply with conditions applicable to entities involved in the business of e-commerce, as set out in the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017. “As such, Flipkart Internet is bound by these laws, the compliance of which is ensured by the relevant authorities,” it said.
However, the vendors association does not intend to back off, taking the case to the NCLAT, which had become the appellate authority for orders passed by the CCI from May 2017. While the association had delayed the filing of an appeal by 12 days, the NCLAT this week nevertheless admitted the appeal, with the three-member NCLAT bench headed by Chairman Justice S J Mukhopadhaya directing that the matter be listed for hearing on July 30.