Flipkart and Amazon face fresh court battle, anti-trust investigation into business practices

E-commerce players Flipkart and Amazon once again find their business in limelight after the Centre on Monday proposed tighter norms to provide more transparency. The revised Consumer Protection (E-Commerce Rules), 2020, proposes that all e-commerce companies operating in India will need to be registered with the government.

This will also impact foreign e-commerce companies like Alibaba and Club Factory that were selling goods directly to Indian consumers by evading taxes and duties. With the revised laws, they will now have to appoint a chief compliance officer and a nodal contact person for 24/7 coordination with law enforcement agencies. The foreign companies will also need to have a resident grievance officer to address consumer complaints.

Archana Tewary, partner, J Sagar Associates, said that the proposed rules seek to hold e-commerce entities which operate in India accountable. “The proposed rules also seek to regulate the manner in which consent will be obtained from consumers for the sharing of their data with other persons.”

Moreover, the revised law seeks to mandate the sharing of information by e-commerce entities with governmental authorities within 72-hours and require the online marketplaces to ensure that none of its related parties and associated enterprises are enlisted as sellers for sale to consumers directly. Tewary said the definition of associated enterprises also seems to be wide. “These changes are wide-ranging and will have significant implications.”

The proposal comes 11 months after rules for e-commerce were first notified. It brings under purview in-house logistics companies operated by e-commerce players. The draft rules said no in-house logistics provider will offer differentiated treatment to sellers of the same category. As such, the ministry explained that proposed changes in the rules have become necessary due to unfair trade practices by online platforms.

Facing fresh court battle and investigations

Moreover, India’s e-commerce majors, Walmart-backed Flipkart and Amazon are facing fresh court battle against the Competition Commission of India’s (CCI) bid to restart an investigation into their business practices. For years, these two companies have taken brick-and-mortar Indian retailers head-on, for alleging that they bypass the foreign investment law by favoring some sellers and influencing prices of products, which are prohibited.

Harish Salve, Flipkart’s counsel, told a two-judge bench in Karnataka that he sees nothing wrong in telling the sellers of Flipkart marketplace that they will be charged a lower fee, if they reduce their prices. “I tell my sellers at a time like Diwali if you reduce your prices, I will give you a reduction in rent. What’s wrong?”

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However, this statement drew criticism from the Confederation of All India Traders. It said the practices were prohibited under India’s foreign direct investment (FDI) rules. Praveen Khandelwal, secretary general of CAIT, pointed out that the comments clearly corroborate the view and complaints made by CAIT time and again. “FDI policy specifically provides that marketplace should not influence prices.” India’s foreign investment law for e-commerce says entities providing a marketplace will not directly or indirectly influence the sale price of goods or services.