CCI boost for ecommerce biggies: Commission rules neither Flipkart nor Amazon is abusing its dominance

flipkart, amazonFlipkart India has argued it did not have exclusive arrangements with its B2B customers and that it does not impose any restraints on any resellers who chose to sell their products on the Flipkart platform.

The ruling by the Competition Commission of India (CCI) that neither Flipkart nor Amazon is abusing a dominant position would have come as a blow to the online vendors. But then, no definitive data was provided to prove that Flipkart Internet is in fact a dominant player and holds a 40% market share as alleged by the All India Online Vendors Association. As the Commission noted, Amazon, too, is a large global player. Defining the “services provided by online marketplace platforms for selling goods in India” as the the relevant geography, the Commission chose to examine the allegations of the association from the point of the marketplace—Flipkart Internet—alone and not consider Flipkart India. In the relevant market, therefore, it said Flipkart India was not dominant.

Also, the charge by the association that Flipkart India, a wholesaler, was giving WS Retail Services Private Limited special treatment didn’t stick because the structural link between Flipkart Internet and WS Retail, in terms of a common ownership, doesn’t exist anymore. The association’s charge was that Flipkart marketplace had abused its position by facilitating discounts and also by leveraging its position to enter into another market of manufacturing products through private labels. The online vendors are understandably aggrieved they don’t have access to the kind of resources that Flipkart has from venture funds and now Walmart. It is a fact that this prevents them from offering the kind of discounts that WS Retail Services does. However, that is true for every business; one only needs to look at the telecom space to realise how large resources can empower a company and allow it to offer products at steep discounts, thereby hurting other players.

For its part, Flipkart India has argued it did not have exclusive arrangements with its B2B customers and that it does not impose any restraints on any resellers who chose to sell their products on the Flipkart platform. Neither does it impose any exclusivity requirements on its B2B customers with respect to procuring the products from Flipkart India. All this may be true but the fact is that the large amounts of foreign capital that the Flipkart companies have had access to have helped their business in India. Indeed, with Walmart now in control of Flipkart, online vendors must brace for more competition.

The CCI’s point that the marketplace based e-commerce model is still a relatively nascent and evolving model of retail distribution in India, and that any intervention in such markets should not stifle innovation, is well taken. There will be some pain but there is no doubting the potential of the online retail channel. Also, it is not as though everything is always fair in the brick and mortar space; there, too, big money would have hurt smaller players.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Source: Financial Express