An antitrust investigation in India has revealed that US e-commerce giants Amazon and Walmart's Flipkart have breached local competition laws by favoring certain sellers on their platforms, according to confidential reports obtained by Reuters. The Competition Commission of India (CCI) launched an investigation into Amazon and Flipkart in 2020, following allegations that they were promoting specific sellers with whom they had business ties and prioritizing certain listings. In a 1027-page report on Amazon and a separate 1,696-page report on Flipkart, both dated August 9, CCI investigators concluded that the two companies had established an ecosystem where preferred sellers were prominently featured in search results, thereby disadvantaging other sellers.
Both reports, which are not publicly available and are being reported by Reuters for the first time, stated that "each of the anti-competitive practices alleged... were investigated and found to be true." The reports also noted that "ordinary sellers remained as mere database entries." Neither Amazon nor Flipkart, nor the CCI, responded immediately to queries from Reuters. Both companies have previously refuted any wrongdoing, asserting that their practices comply with Indian laws. They will now review the reports and submit any objections before CCI staff determine potential fines.
The findings of the investigation represent another blow to Amazon and Flipkart in a country where they continue to face criticism from smaller retailers, who argue that their businesses have been adversely affected by the deep discounts offered online. The investigation was initiated in response to a complaint from Delhi Vyapar Mahasangh, a coalition of brick-and-mortar retailers. Amazon and Flipkart dominate India's e-retail market, which is projected to be worth $57-60 billion in 2023 and is expected to exceed $160 billion by 2028, according to consultancy firm Bain.
In the United States, the Federal Trade Commission has filed a lawsuit against Amazon, accusing the company of employing "anticompetitive and unfair strategies to illegally maintain its monopoly power." Amazon has contested the FTC's lawsuit, arguing that it is misguided and would harm consumers by resulting in higher prices and slower deliveries. During the investigation, Indian authorities raided certain sellers affiliated with Amazon and Flipkart, following a Reuters investigation in 2021 that was based on internal Amazon documents and revealed that the company had been giving preferential treatment to a select group of sellers for years, thereby circumventing Indian laws. Amazon has denied any wrongdoing, but the CCI previously informed an Indian court that the Reuters special report corroborated evidence against the company.
The CCI investigation report on Amazon highlighted that preferred sellers on the platform "gain an advantage in the (online) listing" and that when a customer searches for a product, "their attention is drawn towards" those listings. The practice of preferential listings and deep discounting of mobile phones, including selling products below cost price, has a "catastrophic impact on the existing competition in the market." The report on Flipkart similarly noted that preferred sellers were provided various services such as marketing and delivery at a "miniscule cost." Flipkart also enabled these sellers to offer phones at deep discounts, which the CCI termed as "predatory pricing" and a practice that stifles competition.
Both reports emphasized that the anti-competitive practices are not confined to the sale of mobile phones but are also prevalent in other categories of goods. For months, Flipkart and Amazon attempted to halt the investigation through legal challenges in courts, but the Supreme Court in 2021 permitted it to proceed. Last month, India's commerce minister publicly criticized Amazon, stating that the company's investments were frequently used to offset its business losses. In June last year, Amazon announced that it would increase its Indian investment to $26 billion by 2030, including for its cloud business, and is aiming to achieve merchandise exports worth $20 billion from India by 2025.
