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MR. MOHIT MANGLANI vs M/s FLIPKART INDIA PRIVATE LIMITED & Ors. – COMPETITION COMMISSION OF INDIA DECIDED ON 23.04.2015

By November 12, 2015 December 20th, 2019 2 Comments
SUBJECT-
E-COMMERCE
In a move that might have far reaching
consequences towards creating transparency and accountability in the legal
system, fair trade regulator, Competition Commission of India (CCI) is probing
whether certain resale price arrangements between manufacturer and e-retailers
violate competition norms.  Such is done
to prevent practices having adverse effect on competition, to promote and
sustain competition in markets, to protect the interests of consumers and to
ensure freedom of trade carried on by other participants in markets.
Brief Facts
1.  
Mr. Mohit Manglani (the Informant) had filed a complaint under
Section 19(1) (a) of the Competition Act, 2002(“the Act”) against various
e-commerce/portal companies (Opposite
Parties) for their alleged contravention of the provisions of Section 4 of
the Competition Act, 2002.
2.  
It was alleged by the Informant that
these e-commerce websites have been indulging in anti-competitive practices in
the nature of “exclusive agreements” with seller of goods/services. The Informant
stated that owing to such practices, the consumer was left with no option in
regards to terms of purchase and price of the goods and services and was bound
to either purchase the product as per the terms of the website or opt not to
purchase the product in totality.
3.  
The Informant further alleged that the
e-portal/e-commerce websites and product sellers enter into ‘exclusive
agreements’ to sell the selected products exclusively on selected portal to the
exclusion of other e-portals or physical channels. The conditions which the
portals decides are non-negotiable for a consumer who intends to buy the
products. Further, the supply is controlled by the e-portal with whom the
exclusive arrangement has been made thereby creating an impression of scarcity.
4.  
The Informant stated that Section 3(1)
read with Section 3(4) of the Act are fairly applied on ‘exclusive agreement’
and ‘restrictive/unfair business practice’ of these e-portals. By slowly
destroying players in physical market and creating product specific monopoly
leading to manipulation of price, control of production and supply, imposing
terms and conditions detrimental to interests of consumer, such agreements
distort fair completion in the marketplace.
5.  
It was also stated that each e-portal
i.e. the Opposite Party has 100% market share for the product in which it is
exclusively dealing and which in turn leads to dominance. It was further
contented that the relevant market has to be defined in context of a particular
product in question and the dominance be seen accordingly.
6.  
It was contended that an e-commerce
portal’s business is that of a market place model where the supplier is the
owner of the products which are sold through online retail portals and the
customer making such purchase is the end purchaser of the product.  Therefore the e-commerce websites merely act
as a platform that brings the two sides together for simplifying the
transaction.
7.  
It was contented that exclusive
agreement is not in violation of Section 3(4) of the Act as there is no
appreciable effect on competition (AAEC) in the relevant market. It was also
contended that given the wide range of products, availability of substitutes,
and consumer preferences, no single manufacture is able to exercise market
power to cause any competition concern.
8.  
All Delhi Computers Traders Association
(ADCTA) submitted that the e-commerce websites have engaged in unfair trade
practices and introduced illegal black money as FDI in such business. It was
contented that OPs have adopted the practice of purchasing the goods from the
distributors on 21 to 30 days credit and then subsequently selling products at
prices lower than the purchase price. ADCTA further submitted that OPs impose
conditions like quantity restrictions, purchase of goods by the end of
consumers only for personal use and re-sale etc. It was alleged that the OPs
have also indulged in practices like predatory pricing in abuse of their
dominant position under provisions of section 4(1) and 4(2) of the Act.
Issue for Consideration
The main issue for consideration was:-
Whether the practice of entering into
exclusive agreement for sale and purchase of goods by way of e-commerce is
violating the provisions of Section 3(1), 3(4) (b) & (c) and Section 4(a)
(i), 4(b) (i) and 4(b) (ii) of the Competition Act, 2002 and have an
appreciable adverse effect on competition (AAEC) in India.
 Decision
of the Court
1.  
The Commission analyzed the material
available on record and heard the parties. As observed by the Commission, the
Informant was primarily aggrieved by the exclusive distribution arrangements
between the manufacturers and OPs which, as per the Informant, leave the
consumer with no option but to accept the onerous terms/price as imposed by the
exclusive online seller i.e. OPs
2.  
The Commission further considered
various factors laid down under Section 19(3) of the Act such as:
a.   
Creation of barriers to new entrants in
the market;
b.   
Driving existing competitors out of the
market;
c.   
Foreclosure of competition by hindering
entry into the market;
d.  
Accrual of benefits to consumers;
e.   
Improvements in production or
distribution of goods or provisions of services;
f.    
Promotion of technical, scientific and
economic development by means of production or distribution of goods or
provision of services to assess the effect of such exclusive arrangement
between manufacturers and e-portals.
3.    
Further the Commission observed that
online distribution channel by the OPs provide an opportunity to the consumer
to compare the price as well as the pros and cons of the product. Also it
provides the option of delivery right at their convenience .Therefore it does
not appear that the exclusive arrangement between manufactures and e-portals
lead to AAEC in the market.
4.    
The Commission further observed that
every product of OPs cannot be considered as a relevant market in itself,
therefore, it was stated in the order that e-portal acts as a separate relevant
product market or as a sub-segment of the market for distribution. Therefore
the Commission while adjudicating upon the present dispute, did not dwell into
the question of abuse of dominance by the OPs as raised by the Informant and
ADCTA. Further, it does not appear that because of these exclusive agreements
any of the existing players in the retail market are getting adversely
affected, rather with new e-portals entering into the market, competition seems
to be growing

 The
Commission opined that no case of contravention of provisions of either Section
3 or Section 4 of the Act is made out against the OPs, therefore the matter is
closed under the provisions of Section 26(2) of the Act.

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