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India to probe anti-competition business practices of Amazon and Flipkart

In 2019, Amazon and Flipkart collectively raked USD 4.3 billion in sales during festive period on top of deep discounting.

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Two days before Amazon founder Jeff Bezos’ planned trip to India, the country’s anti-trust watchdog has ordered a probe into the business practices of Amazon India and its local competitor Flipkart to find out if they violated FDI regulations by forging exclusive partnerships with manufacturers and offering deep discounts.

Competition Commission of Indi (CCI) has asked the investigation team to submit its report within 60 days.

The inquiry, petitioned by a group of physical retailers’ association called Delhi Vyapar Mahasangh, has claimed online retailers Flipkart and Amazon India has been abusing their dominant position to get into an exclusive partnership with electronics manufacturers, especially smartphone brands to launch their recent models on their platforms first.

“It has been alleged that most of these preferred sellers are affiliated with or controlled by Flipkart or Amazon, either directly or indirectly,” the CCI probe order said.

Further, the trader’s association in its petition to CCI, said Amazon India and Flipkart have been influencing prices being charged by sellers by providing several discounts as well as inventory to the sellers.

India’s FDI (foreign direct investment) regulation for online companies forbids e-commerce marketplaces from dictating or altering prices of the products and controlling the product inventory. It goes on to say that online marketplaces can’t get into an exclusive partnership with manufacturers or sellers.

Last year Walmart-backed Flipkart as well as Amazon India during India’s yearly festive period from September to October ran their respective flagship sale and offered deep discounts on products, especially electronic items such as smartphones and smart TVs. The festive sales became a huge hit for the e-tailers, fetching them a total of USD 4.3 billion.

In their defense, both the e-tailers in the past have maintained their stance that the discounts are provided directly by the brands and they have no control over the pricing strategy.

In a statement, an Amazon spokesperson said, “We welcome the opportunity to address allegations made about Amazon; we are confident in our compliance and will cooperate fully with CCI.”

CCI said that exclusive partnerships with smartphone brands and discounting offered by opposite parties—Flipkart and Amazon India—would have an adverse effect on physical retailers.

Several mobile manufacturing companies like One Plus, Oppo, Samsung, Xiaomi, among others have exclusively launched their models on Amazon and Flipkart. In its 11-page order, CCI has noted that in 2018, Flipkart exclusively launched 67 mobile phones, while Amazon India launched 45 mobile phones on its platform.

In a separate development, Xiaomi and Samsung informed All India Mobile Retailers Association that they would launch their new products simultaneously on all platforms.