On March 4, 2020, NCLAT set aside CCI’s order dismissing allegations pertaining to abuse of dominance filed by the All India Online Vendors Association (‘AIOVA’) against Flipkart India Private Limited (‘Flipkart India’) and Flipkart Internet Private Limited (‘Flipkart Internet’) (collectively, ‘Flipkart’)[1].

AIOVA had alleged before CCI that Flipkart India engages in preferential treatment of certain sellers by selling goods at a discounted price to companies like WS Retail which are owned by the founders of Flipkart Internet. WS Retail subsequently sold such goods on Flipkart Internet’s e-commerce platform. AIOVA alleged that such acts of Flipkart India and Flipkart Internet were to the detriment of other manufacturers selling on their platforms.

In its assessment, based on the nature of the distribution chain implemented by Flipkart India, CCI defined a single market for ‘services provided by online marketplace platforms for selling goods in India’. CCI noted that AIOVA’s submission on Flipkart’s dominance lacked any evidentiary backing. CCI relied on publically available information to note that no single player was dominant in the relevant market owing to low entry barriers and the market structure. CCI further noted that (i) the arrangements of Flipkart India with its B2B customers are neither exclusive nor impose any restraints; (ii) the structural link between Flipkart Internet and WS Retail existed only till 2012 and WS Retail is no longer a supplier on Flipkart since April 2017; and (iii) terms and conditions imposed by Flipkart Internet on its sellers are standard in nature. Based on the above, CCI dismissed the complaint.

Upon appeal, NCLAT relied upon the decision passed by the Income Tax Appellate Tribunal (‘ITAT’) in Flipkart India Private Limited v Assistant Commission of Income-Tax[2] (‘Flipkart ITAT Order’) where the Assessing Officer noted that Flipkart India would buy and sell goods at a loss, in order to “establish a monopoly in market by brand building by generating consumer goodwill”. While these submissions of the Assessing Officer were set aside by ITAT, NCLAT opined that the conclusions drawn to impose tax were different from the facts required to be assessed by CCI to make its prima facie analysis under the Act. NCLAT concluded that several issues, such as predatory pricing, were pointed out by the AIOVA at the prima facie stage and a case for investigation was made out. Accordingly, NCLAT allowed the appeal and directed CCI to direct DG to conduct an investigation into the allegations.

[1] Competition Appeal (AT) No. 16 of 2019 [2] ITA No. 202/Bang/2018.