NEW DELHI, Sept 12 (Askume) – An Indian antitrust probe found that U.S. e-commerce giants Amazon (AMZN.O) and Walmart’s (WMT.N) Flipkart violated local competition laws by preferentially favoring specific sellers on their shopping sites, a report said.
The Competition Commission of India (CCI) in 2020 ordered an investigation into Amazon and Flipkart for allegedly promoting certain sellers and giving preferential treatment to certain items .
In a 1,027-page report on Amazon dated August 9 and a separate report on Flipkart, CCI investigators said the two companies had created an ecosystem in which preferred sellers are ranked higher in search results, crowding out other sellers.
“Each alleged anti-competitive conduct was investigated and found to be substantiated,” said both reports, which are not public and were first reported by Askume.
Two reports for both companies concluded, “The average salesperson is still just a database entry.”
Amazon, Flipkart and the CCI did not immediately respond to Askume questions. They have previously denied wrongdoing and said their practices comply with Indian law.
The two companies will now review the report and raise any objections, before the CCI staff decides on any possible penalties.
The findings are the latest blow to Amazon and Flipkart in China, as their business practices face criticism from smaller retailers who say their business has suffered in recent years because of deep discounts offered online.
The investigation was initiated on the complaint of the Delhi-based Vyapar Mahasangh, an affiliate of the Confederation of All India Traders (CAIT), India’s largest trade body representing 80 million retailers.
CAIT welcomed the CCI’s findings in a statement to Askume and said it would study the reports and “pursue the matter” with the federal government.
Amazon and Flipkart are leading India’s e-retail market, which consulting firm Bain estimates will be worth $570-60 billion by 2023 and top $160 billion by 2028.
In the United States, the Federal Trade Commission has sued Amazon , accusing the company of using “anti-competitive and unfair tactics to unlawfully maintain its monopoly power.” Amazon said the FTC’s lawsuit was wrong and would harm consumers due to higher prices and slower delivery times.
Promotional listings, huge discounts
Indian investigators raid some Amazon and Flipkart sellers during probeA 2021 Askume investigation based on internal Amazon documents showed that the company had for years given preferential treatment to a small group of sellers on its platform and used them to violate Indian laws.
The company denies any wrongdoing, but the CCI has previously told an Indian court that a Askume exclusive report corroborated its evidence against Amazon .
The CCI investigation into Amazon noted that preferred sellers on the platform “enjoy an advantage in (online) listings” and when a customer searches for a product, “his attention is drawn to these listings”.
The practice of prioritising mobile phone launches and deep discounting, which involves selling products at prices below cost, has a “destructive effect on the competition existing in the market.”
In its report on Flipkart, CCI said preferred sellers could get various services such as marketing and delivery at a “very low cost”. Flipkart also allowed them to sell phones at deep discounts, which amounted to “abusive pricing” and killed competition, CCI said.
Both reports stated: “Anti-competitive behaviour is not limited to the sale of mobile phones. It is equally prevalent in other categories of goods.”
Flipkart and Amazon tried for months to stop the investigation through legal challenges in the courts, but the Supreme Court allowed the investigation to continue in 2021.
Last month, India’s commerce minister publicly criticised Amazon and said the company’s investments were often used to cover its business losses.
Amazon said in June last year that it would increase its investment in India to $26 billion by 2030, including in its cloud business. It also plans to take Indian merchandise exports to $20 billion by 2025.
