2018 (11) TMI 1932 - Commission - Indian Laws

Misuse of dominant position - Contravention of the provisions of Section 4 of Competition Act, 2002 - Abuse of dominant position - selling goods below cost price also result in denial of market access to the individual sellers who are not backed by VC funds and investors and thereby such acts also contravene the provisions of Section 4 (2) (c) of the Act - using its dominance in the relevant market by leveraging its position to enter into another market by way of extending discounts and manufacturing products under private labels. HELD THAT - The relevant product market in this case may be considered as Services provided by online marketplace platforms - Further, as per the provisions of the Act, relevant geographic market comprises the area in which conditions of competition are distinctly homogeneous. For online market platforms, the conditions of competition are homogeneous pan India and as such, the relevant geographic market in this case may be taken as India - the relevant market in the instant case may be defined as Services provided by online marketplace platforms for selling goods in India . Issue of dominance - HELD THAT - Flipkart India is not dominant in the relevant market of Services provided by online marketplace platforms for selling goods in India ; therefore, the issue of abuse of dominant position does not arise. The Commission, however, deems it appropriate to take on record the submissions made by Flipkart denying abusive conduct by its entities. In regards to Flipkart India, it has been submitted by Flipkart that the arrangements of Flipkart India with its B2B customers are neither exclusive nor do they impose any restraints on any reseller who chooses to sell their products on the Flipkart platform. Further, Flipkart India does not impose any exclusivity requirements on its B2B customers with respect to either procuring the products from Flipkart India or with respect to reselling these products to any third parties, or selling on/ through the Flipkart marketplace. The option of dealing with Flipkart India is available to any vendor. There is no restriction on any entity desirous of dealing with Flipkart India as a B2B customer. Further, the B2B customers are independent third party vendors with whom Flipkart India has arm s length arrangement. The Commission is of the opinion that no case of contravention of the provisions of Section 4 of the Act is made out against the Opposite Parties and the Information is ordered to be closed forthwith in terms of the provisions contained in Section 26(2) of the Act. Application disposed off.

Summary

Issues Involved:
1. Allegations of abuse of dominant position by Flipkart.
2. Definition of the relevant market.
3. Examination of dominance in the relevant market.
4. Examination of preferential treatment and unfair trade practices.
5. Interim relief and investigation requests by the Informant.

Issue-wise Detailed Analysis:

1. Allegations of Abuse of Dominant Position by Flipkart:
The Informant, All India Online Vendors Association, alleged that Flipkart India Private Limited (OP-1) and Flipkart Internet Private Limited (OP-2) engaged in practices contravening Section 4 of the Competition Act, 2002. The allegations included selling goods at discounted prices to certain sellers like WS Retail Services Private Limited, which then sold these goods on Flipkart's platform, resulting in preferential treatment and unfair trade practices. The Informant claimed this amounted to abuse of dominant position by Flipkart.

2. Definition of the Relevant Market:
The Commission examined the relevant market to assess the allegations. The Informant defined the relevant market as "services provided by online marketplaces for selling goods in India." Flipkart's counsel argued for two distinct markets: Business to Business (B2B) and Business to Consumer (B2C), emphasizing that Flipkart India operates in the B2B market while Flipkart Internet operates in the B2C market. The Commission rejected this argument, noting that the allegations were primarily against Flipkart Internet (OP-2), and therefore, it was unnecessary to define two separate markets. The relevant market was defined as "services provided by online marketplace platforms for selling goods in India."

3. Examination of Dominance in the Relevant Market:
The Informant claimed that Flipkart held over 40% market share, but did not provide credible sources for this data. The Commission observed that the online marketplace sector in India includes multiple players like Amazon, Paytm Mall, SnapDeal, and Shopclues, with Amazon being a significant competitor to Flipkart. Despite Flipkart's large size and resources, the Commission found no player commanding a dominant position in the market. Therefore, the issue of abuse of dominant position did not arise.

4. Examination of Preferential Treatment and Unfair Trade Practices:
The Commission noted that Flipkart India does not impose exclusivity requirements on its B2B customers, and any vendor can deal with Flipkart India. The Informant's claim of preferential treatment to WS Retail Services Private Limited was also dismissed, as WS Retail was no longer a seller on Flipkart's platform post-April 2017. The Commission found no material evidence to substantiate the allegations of unfair trade practices.

5. Interim Relief and Investigation Requests by the Informant:
The Informant sought interim relief under Section 33 of the Act to restrict preferred sellers from participating in sales events and requested a thorough investigation of the e-commerce sector. The Commission held preliminary conferences with the parties, including Amazon Seller Services Private Limited, to understand the online retail sector's nuances. However, the Commission concluded that no case of contravention of Section 4 of the Act was made out against Flipkart or Amazon. The Commission emphasized the need for careful intervention in the nascent and evolving e-commerce market to avoid stifling innovation.

Conclusion:
The Commission ordered the closure of the information under Section 26(2) of the Act, finding no contravention of the provisions of Section 4 by Flipkart or Amazon. The Secretary was directed to communicate this decision to the parties involved.