The Competition Commission of India has opened an antitrust probe into Jeff Bezos-owned Amazon and Walmart-backed Flipkart after a traders' body alleged preferential treatment and exclusive arrangements between the sellers on these portals. Delhi Vyapar Mahasangh, a Delhi based traders' organisation which comprises members from MSMEs, filed a complaint against both Amazon and Flipkart. The probe comes days ahead of Amazon founder Jeff Bezos' India visit and the CCI investigation is not the only concern for the billionaire. He is also expected to face unprecedented backlash from crores of traders across 300 cities in India.
Why are traders irked?
The tiff between e-commerce portals and traders has been going for a couple of years now as traders have alleged that e-tailers have ruined the business of SMEs, MSMEs and offline retailers. In the CCI complaint, Delhi Vyapar Mahasangh alleged that not only do these portals influence prices by providing discounts but are also engaged in anti-competitive practices. Selling of discounted products puts others on a disadvantage, the traders said.
The preferential treatment meted out to handful of sellers such as Omnitech Retail by Flipkart and Appario Retail, Cloudtail India by Amazon means unpreferred sellers are "unable to compete with such prefered sellers" the filing from the Competition Commission of India said. "The Informant [Delhi Vyapar Mahasangh] alleged that there is evidence in the form of communications from Flipkart to its sellers stating that it would incur a part of the cost during the Big Billion Days (BBD) sales or Diwali sales etc," it added. Other sellers are not privy to such services.
Both Amazon and Flipkart have a feature of their platforms called "Fulfilled" and "Assured Seller" respectively. These labels occur for the sellers who enjoy preferential listing on these platforms. This allegedly "creates a bias in favour of preferred sellers to the detriment of other sellers," the CCI filing said, adding that preferential listing pushes "the results of the non-preferred sellers further down in the search results without any basis whatsoever."
Moreover, both these e-tailers have their own private labels and tie-ups which provides "exclusivity through discounting and preferential listing," the CCI said. The same means other retailers do not have access to the online market and are forced to sell their items via traditional methods of trade, devoiding them of pan-India reach. Further, both Amazon and Flipkart receive substantial amounts of funding from investors, allowing them to subsidise items on their platforms, the filing said.
With a large store of customer data, these online portals are also able to send targeted advertisements based on customer preferences. "This has resulted in creation of high entry barriers on account of network effects," traders allege.
What's in store for Amazon, Flipkart?
Based on the documents submitted by the Delhi Vyapar Mahasangh, CCI has noted that there are four alleged practices on the marketplaces — exclusive launches, preferential treatment and preferential listing, and deep discounting. CCI has further noted that there is a prima facie evidence against e-commerce portals for having exclusive partnerships with smartphone manufacturers. However, it has said that the issue of deep discounting needs to be assessed further. The antitrust body is directed to investigate and submit its findings within 60 days of the order made available on 13th January 2020.