The order follows a complaint filed by Delhi Vyapar Mahasangh which accused the e-commerce firms of anti-competitive practices like preferential listing, exclusive tie-ups and private labels.
Fair trade regulator CCI on Monday ordered a probe against e-commerce majors Flipkart and Amazon for alleged malpractices, including deep discounting and tie-ups with preferred sellers on their platforms.
The order follows a complaint filed by Delhi Vyapar Mahasangh, whose members comprise many traders dealing in smartphones and related accessories.
The traders' body accused the e-commerce firms of anti-competitive practices like preferential listing, exclusive tie-ups and private labels.
In its order, the Competition Commission of India (CCI) said it needs to be investigated whether the alleged exclusive arrangements, deep discounting and preferential listing by online marketplace platforms are being used as an "exclusionary tactic to foreclose competition" and are resulting in an appreciable adverse effect on competition.
Commenting on the order, an Amazon India spokesperson said, "We welcome the opportunity to address allegations made about Amazon. We are confident in our compliance, and will cooperate fully with CCI."
Incidentally, Amazon founder Jeff Bezos is expected to visit India this week.
Meanwhile, a Flipkart spokesperson said they are currently reviewing the CCI order.
"The Flipkart group is fully compliant with all applicable laws and FDI regulations.
“We take pride in democratising e-commerce in India and giving market access to lakhs of MSMEs, sellers, artisans and small businesses, making quality and affordable goods available to consumers through our transparent and efficient marketplace while creating lakhs of jobs," the spokesperson added.
In its complaint, the trade body alleged that there were instances of several vertical agreements between Flipkart and Amazon and their preferred sellers which have led to exclusion of other non-preferred traders from these online marketplaces.
It has been also been alleged that most of these preferred sellers are affiliated with or controlled by Flipkart or Amazon, either directly or indirectly.
Besides, the platforms also gather data on consumer preferences and allegedly use them to their advantage, it added.
"This arrangement has far-reaching consequences on the economy as the non-preferred sellers are relegated to sell only through traditional brick and mortar set-up which involves significant fixed costs and are devoid of wide pan-India reach which online marketplaces offer," it was alleged.
"The Commission observes that the exclusive arrangements between smartphone/mobile phone brands and e-commerce platform/select sellers selling exclusively on either of the platforms, as demonstrated in the information, coupled with the allegation of linkages between these preferred sellers and OPs (opposite parties) alleged by the Informant merits an investigation," the CCI said in its order.
Further, it needs to be investigated whether the alleged exclusive arrangements, deep discounting and preferential listing by the e-commerce platforms are being used as an exclusionary tactic to foreclose competition and are resulting in an appreciable adverse effect on competition, contravening the provisions of the Competition Act, the CCI noted.
The Competition Commission has asked the director general to complete the investigation and submit a report within 60 days.
Praveen Khandelwal, secretary general of the Confederation of All India Traders (CAIT) which is spearheading an aggressive nationwide movement against Amazon and Flipkart, said this CCI order has been long awaited by the traders of the country.
"Both Amazon and Flipkart have left no stone unturned in destroying and devastating the e-commerce and retail trade market by indulging into all kinds of malpractices including causing huge GST and income tax revenue loss to the government.
“Their autocratic business module has resulted into closure of thousands of shops in the country in last three months," he added.
Photograph: Brendan McDermid/Reuters