File Copyright Online - File mutual Divorce in Delhi - Online Legal Advice - Lawyers in India

Antitrust Case Against Amazon- Abuse Of Dominant Position

Amazon is known as titan of commerce of twenty first century founded by Jeff Bezos. Amazon started as a small website for online books soon became one of the biggest retailers in world. It also offers giant e-commerce which comprises everything virtual such as food, toys, apparel, electronics, etc. Additionally, to e-commerce, Amazon's revenue comes from various services like subscription, cloud computing, whole food grocery sales and other sources.

Furthermore, it also sells its own electronics namely Amazon Kindle and Amazon Echo which are built by Amazon itself. In 2020, the overall gross merchandise volume (GMV), together with sales by Amazon itself and by the marketplace, was nearly $490 billion.[i]

The Competition Commission of India (CCI) in 2020 ordered a quest into alleged competition law violations by Amazon and Walmart-owned Flipkart over allegations that the e-commerce majors promoted and gave discounts to “preferred" sellers, entered exclusive partnerships with smartphone brands and abused their dominant position.

Antitrust law also known as Competition law is made for the protection of trade and commerce from unfair practices, price-fixing, bid rigging and monopolies which was developed by US government in order to safeguard customers from unfair practices. This law was made to ensure that the existence of competition in an open market economy is unbiased. The Competition Act, 2002 is referred as India's Antitrust law.

On the directions of Raghavan Committee the act was nullified and replaced by the Monopolies and Restrictive Trade Practices Act, 1969. The antitrust law started out as being against power and making it easier for little firms to get into the market and survive as well as to protect the consumers. Also, the European Commission commenced an investigation in June 2015 concerning clauses in Amazon's e-book distribution agreements that probably broken EU antitrust regulations by creating it tougher for alternative e-book platforms to contend.

This investigation was finished in 2017 once the Commission adopted a call that rendered binding Amazon's commitments to not enforce these clauses. Amazon insisted that - faraway from being anti-competitive - its private-label product was smart for purchasers and offered a lot of selection.

Amazon India's case in CCI- Lifestyle Equities C.V. And Ors. vs Amazon Sellers Service Private
Beverley Hills Polo Club (BHPC) which is owned and distributed by Lifestyle Equities C.V.(Licensee) and Lifestyle Licensing B.V. – Netherland based companies filed the complaint against Amazon Seller Services, Amazon Export Sale and Cloudtail India accusing that the alleged company has abused its dominant position for Online Fashion Retail in Indian market. The case was dismissed by Competition Commission of India (CCI) of abuse of dominance against Amazon.

According to the order, the Informants (BHPC) filed an information under Section 19 (1)(a) of the Competition Act, 2002 which states that the Commission may inquire into any alleged contravention of the provisions contained in sub-section (1) of section 3 or sub-section (1) of section 4[ii] against Amazon Seller, Amazon Exports and Cloudtail India. Amazon Seller Services is a private limited company which is involved in the business that deals in handling and managing online sale website i.e. www.amazon.in and, Amazon Export Sales is vested in USA which is a Limited Liability Corporation (LLC). The order placed by the consumers on Amazon website are retailed by Amazon Sales. Cloudtail India is one of the largest sellers on Amazon Online website.

The Informants (BHPC) made an accusation of unfair and anti-competitive practice against the opposite party which results in reputational harm and caused an impact on the visibility of their fashion products. Moreover, the Informants made an accusation regarding abuse of dominance by Amazon Seller Service which created unfair market conditions by putting barriers in entry to relevant market. The Informants provided an information that the online website of Amazon was offering counterfeit, unlicensed and unauthorized products at three times lesser price than the original price of their brand namely, Beverley Hills Polo Club (BHPC).

Allegation of abuse of dominant position (Section-4)
Section-4(2) states that abuse of dominant position occurs when any organization or group imposes a condition of unfairness in the price or sale and purchase of goods and services, or imposes any restriction or limitation on the production of goods and services, etc.[iii] There shall be an abuse of dominant position if any organization or group involves in such practices that results in denial of market place.[iv]

Informants accused the opposite party that they had abused its dominant position in the market for ‘online fashion retail in India'. Further Informants stated that the market share of both Flipkart and amazon is about 62% of the total retail space in online, out of which Amazon covers share of 31.1% in the retail space of online fashion. Also, it was introduced that Amazon in terms of Gross Merchandise Value (GMV) is way ahead with gross sale of $7.5 billion in 2018 financial year while Flipkart is at $6.2 billion.

By proving this information Informants showed that Amazon was in dominant position. Informants company provided that they do not sell their BHPC brand fashion products on e-commerce platform of Amazon. Also, they added that their products are only available on their own website, licensee website or in brick-and-mortar stores. However, presently the BHPC products are available only on their own website.

Informants also accused the Amazon company by stating that they sell unauthorized, counterfeit and unlicensed products of their brand Beverley Hills Polo Club (BHPC) at three times less than the price of the original products, results in reduction of Informants brand which gave advantage to Informant's competitors.

Allegation of Anti- Competitive Agreements (Section-3(4))
The Informants also made allegations against Amazon of vertical arrangements with Cloudtail India under Section 3(4) of the Competition Act, 2002. Anti-Competitive agreements are that agreements which allow fair competition among competitors and helps to safeguard, restrict and distort competition. Vertical agreements are the agreements between non-competition operating at different levels of manufacturing and distribution process.[v]

The Informants claimed that the agreements between Amazon Seller Service, Amazon Export Sale and Cloudtail India to sell unlicensed, counterfeit and unauthorised products are anti-competitive agreements which results in hindrances for the other competitors in entry to the market. With result to this through anti-competitive agreements Amazon made an exclusionary effect, tie in arrangements which limits the no. of suppliers and distorting competition.

Competition Commission of India's Decision
The CCI on the allegation of abuse of dominance noted that there is no. of players in relevant market for services for selling fashion merchandise provided by online platforms in India. Also, according to Red Seer report 2019 it was submitted that there are multiple players in online fashion merchandise which consists of verticals like Myntra and Ajio and horizontals like Amazon and Flipkart.[vi]

Therefore, on observing the present market the CCI noted that there is not only one platform that have dominant position in the relevant market. Based on this statement and the information available CCI noted that the Amazon does not have dominant position in the relevant market and dismisses the case of abuse of dominance against Amazon Seller Services Private Limited.

Further on the Allegations of anti-competitive agreements under Section 3(4) of the act related to exclusive arrangements by Amazon CCI noted that exclusive tie up arrangements does not exist between fashion brand and online platforms and there are no. of fashion brands, sellers, retailers, customers to contact each other. Resulting to this CCI stated that there is no exclusive arrangement between Amazon and its preferred seller namely, Cloudtail India and the case was closed under Section 26(2) of the act.

According to the allegations of selling of unauthorized, unlicensed and counterfeiting products at lower price the CCI noted that as Amazon does not have dominant position therefore the issue does not lie in anti-trust scrutiny.

CCI stated that beside the anti-trust law the issue of sale of counterfeit products can be entertained through legal and regulatory instruments as it has adverse implication on sellers and buyers. The competition Commission of India concluded the case by stating that the no case is made out against the Amazon based on given facts and circumstances.

Conclusion
In the last half decade, which was further augmented due to the COVID -19 Pandemic, Amazon has grown exponentially in India thereby increasing the reliance of urban India on the conglomerate. Everything, from OnePlus mobile phones to Netflix, has a direct or indirect relationship with Amazon.com LLC and all its affiliates. A prima facie overview would even lead a layman to believe that Amazon does have an adverse effect on competition in India.

This theory is supported by the fact that there are numerous complaints against Amazon in the Competition Commission of India from the small-scale vendors of Maharashtra to mobile phone sellers of Delhi. But due to tactical genius and business acumen of those heading Amazon, most of those complaints don't stick and the Commission lets them go scot free.

While there is a prevalent problem of e-commerce businesses taking up a significant market share, the case of Amazon is a global one as similar complaint are filed in applicable courts/ forums in all jurisdictions across the world where Amazon operates – Brazil, United Kingdom, Australia, United States of America. This begs the question – When exactly will Amazon start having appreciable adverse effect on competition in the global economy?

End-Notes:
  1. Amazon GMV in 2020, available at: https://www.marketplacepulse.com/articles/amazon-gmv-in-2020 (Last Modified February 03, 2021)
  2. Section 19(1) Competition Act, 2002, Act No. 12 of 2003 (India).
  3. Competition Act, 2002, Act No. 12 of 2003 (India).
  4. Section 4 (2)(c) Competition Act 2002, Act No.12 of 2003(India).
  5. Section 3 (4) Competition Act 2002, Act No.12 of 2003(India).
  6. Online Fashion Market Updates, available at: https://redseer.com/newsletters/online-fashion-market-updates-june18 (Visited on March 09,2021)
Written By: Parul  Garg, B.Com.LLB(H),  Year- 3rd -  Amity Law School, Noida

Law Article in India

Ask A Lawyers

You May Like

Legal Question & Answers



Lawyers in India - Search By City

Copyright Filing
Online Copyright Registration


LawArticles

Section 482 CrPc - Quashing Of FIR: Guid...

Titile

The Inherent power under Section 482 in The Code Of Criminal Procedure, 1973 (37th Chapter of th...

Whether Caveat Application is legally pe...

Titile

Whether in a criminal proceeding a Caveat Application is legally permissible to be filed as pro...

How To File For Mutual Divorce In Delhi

Titile

How To File For Mutual Divorce In Delhi Mutual Consent Divorce is the Simplest Way to Obtain a D...

Copyright: An important element of Intel...

Titile

The Intellectual Property Rights (IPR) has its own economic value when it puts into any market ...

The Factories Act,1948

Titile

There has been rise of large scale factory/ industry in India in the later half of nineteenth ce...

Law of Writs In Indian Constitution

Titile

Origin of Writ In common law, Writ is a formal written order issued by a body with administrati...

Lawyers Registration
Lawyers Membership - Get Clients Online


File caveat In Supreme Court Instantly