An investigation by India’s Competition Commission (CCI) has concluded that U.S. e-commerce giant Amazon and Walmart-owned Flipkart violated Indian competition laws by favoring specific sellers on their platforms. According to confidential reports reviewed by Reuters, both companies gave preferential treatment to certain sellers, giving them an unfair advantage in search results over other sellers.
CCI Investigation Unveils Preferential Treatment
The CCI had launched a probe in 2020 to investigate claims that Amazon and Flipkart were promoting sellers with which they had business arrangements. The investigation revealed that the two e-commerce platforms created an environment where favored sellers consistently appeared at the top of search results, sidelining smaller and independent vendors.
In a detailed report spanning 1,027 pages on Amazon and 1,696 pages on Flipkart, the CCI’s findings, dated August 9, confirmed the allegations. Both reports stated, "Each of the anti-competitive practices alleged ... were investigated and found to be true." The findings further highlighted that "ordinary sellers remained as mere database entries," unable to compete with the preferred vendors.
Amazon, Flipkart, and the CCI have not responded to Reuters' queries. Both companies, however, have consistently denied any wrongdoing, asserting that their practices align with Indian laws. They will now have the opportunity to review the report and raise objections before the CCI decides on potential fines or penalties.
Challenges Continue for E-commerce Giants
The investigation marks another challenge for Amazon and Flipkart, who have been facing criticism from small and medium-sized retailers in India. These retailers claim that their businesses have been adversely affected by the deep discounts offered by the e-commerce giants. The complaint that triggered the CCI investigation was filed by the Delhi Vyapar Mahasangh, a group representing brick-and-mortar store owners.
Amazon and Flipkart are key players in India's fast-growing e-commerce market, which Bain & Company estimates was valued at $57-60 billion in 2023 and is expected to grow to over $160 billion by 2028.
The investigation report shed light on practices such as preferential listing and deep discounting, particularly in the sale of mobile phones. Investigators revealed that preferred sellers benefited from better online visibility, drawing customers to their products at the expense of competition. This included selling products below cost price, a practice referred to as "predatory pricing," which significantly disrupted the competitive landscape.
The CCI's findings emphasized that these anti-competitive practices were not limited to mobile phones but extended to other product categories as well.
This investigation is not the first time the companies have come under scrutiny. Indian authorities previously raided the offices of certain sellers linked to Amazon and Flipkart following a 2021 Reuters report that alleged Amazon had been giving preferential treatment to a select group of sellers for years. Amazon denied these claims but failed to prevent the CCI’s investigation from progressing after India’s Supreme Court allowed it to continue.
Ongoing Investments Amid Scrutiny
Despite the growing scrutiny, both companies continue to make substantial investments in India. Last year, Amazon announced plans to invest $26 billion in the country by 2030, focusing on its cloud business and merchandise exports. Flipkart, meanwhile, remains a dominant player in the market, supported by its parent company Walmart. However, the recent findings could lead to significant penalties and force both companies to alter their business practices in India.
With inputs from Reuters
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