A look at Amazon’s legal troubles in India

It all started after the Delhi Vyapar Mahasangh (DVM), a group representing small and medium businesses, submitted a plea with the Competition Commission of India (CCI) in October 2019 against Amazon and Flipkart, alleging that the two were engaging in anti-competitive practices.

Taking into account the smartphone category, DVM alleged that the two companies were giving preferential treatment to a select set of vendors by having an indirect control on their operations.

DVM’s objective was to bring to light how small vendors were finding it difficult to compete with the online giants, given the deep pockets they had to offer discounts to consumers.

It also raised the issue of exclusive smartphone launches on these marketplaces which has been barred by Press Note 2, the Indian rules for marketplaces. The traders’ body also alleged that Flipkart and Amazon were indulging in abuse of dominance positions. These were filed under Sections 3 and 4 of the Competition Act.

While the CCI rejected the abuse of dominance allegation, it passed an order based on the information submitted by DVM under Section 3, directing the director general to conduct an investigation in January 2020.

This order was challenged by Amazon through a writ petition before the Karnataka High Court in February 2020. It received a stay order from the high court during the same month. Later, in September, the CCI challenged the interim order in the Supreme Court. Justice Nageswara Rao sent the case back to the high court, with a condition that the matter must be heard as fast as possible in October 2020.

The case has been going on in the high court since the last couple of months. All concerned parties, including Amazon, Flipkart, CCI and DVM, have finished presenting their arguments before Justice PS Dinesh Kumar. The court has now given the companies time to file rebuttals, if any, which will be heard on April 7, following which it will pronounce the verdict.

Amazon vs Future Retail

Jurisdictions: Delhi High Court, Supreme Court of India, Singapore International Arbitration Centre

This is one of the most convoluted cases Amazon is embroiled in, given the involvement of the sheer number of agencies, companies and jurisdictions.

The Future Group signed an agreement with Reliance Retail, a subsidiary of Reliance Industries, to sell its retail, wholesale, logistics and warehousing business in August 2020. The deal was pegged at Rs 26,000 crore.

Soon after the announcement, Amazon, which held a 49 percent stake in Future Coupons Ltd, the promoter group entity of Future Retail, challenged the deal. Amazon had bought stake in Future Coupons, with the right to buy into flagship Future Retail after 3 years and before 10 years. Future Coupons owns a 7.3 percent stake in Future Retail. The e-commerce giant thus dragged Future to arbitration after the indebted group signed a pact to sell its business to billionaire Mukesh Ambani's RIL.

Amazon invoked an emergency arbitration at the Singapore International Arbitration Centre (SIAC). The tribunal came up with an emergency award in favour of Amazon in October 2020.

That’s when the dispute started. Future Retail said it was not a signatory and not bound by the award.

Future filed a suit in the Delhi High Court stating that Amazon was interfering in its business. Justice Mukta Gupta rendered an order, impugning certain findings. The bench said that while the emergency award was correct, it threw some bad light on the transaction between Amazon and Future Coupons. It said that it could amount to control which is something prohibited under the FEMA regulations in India.

Amazon was aggrieved and it filed an appeal against her order before a division bench in December.

Amazon also filed an application for the enforcement of the emergency tribunal  award before the high court in January. This was being heard by a single-judge bench, Justice JR Midha, who passed an interim order that RIL and FRL cannot act on this transaction any longer.

Following this, Future filed an appeal against the interim order before the division bench, which stayed the operation of the order given by Justice JR Midha.

Against the stay order, Amazon again filed a special leave petition (SLP) in the Supreme Court. Justice RF Nariman will hear this matter. The Supreme Court has listed the case for hearing in the last week of April.

In the meanwhile, Justice JR Midha gave a 135-page reasoned final order show-causing the Biyanis, promoters of the Future Group, and the authorities on why they went ahead with the deal despite an emergency award in place.

The Future Group again filed an appeal before the division bench at the Delhi High Court. No substantive hearing has taken place since the matter is pending in the SC.

The tussle between Future and Amazon comes at a time when Reliance has been bolstering its position in the country's retail segment.

ED investigation against Amazon 

Jurisdiction: Enforcement Directorate 

The Enforcement Directorate (ED), the prosecuting authority under the Foreign Exchange Management Act (FEMA), is investigating Amazon for possible violation of FDI rules in India. This happened after the central probe agency received a notification from the Ministry of Commerce and Industry a few years ago.

Conventionally, ED probes take years in India and the details are mostly never made public. That’s the reason why there’s no specific update on how far the ED investigation has progressed and what exactly is being investigated.

According to some recent media reports, which has quoted sources in ED, the agency has sought information from Amazon regarding its operations in the country. Indian rules bar marketplaces from holding inventory. However, Amazon is learnt to have created structures through which it does business in India by having indirect control.

The ED is also expected to soon launch a second investigation into Amazon, based on a Reuters report which found the company has given select sellers preferential treatment and used them to “circumvent” India’s FDI rules. Moneycontrol couldn’t independently verify this information.

CAIT vs Amazon-Flipkart

Jurisdiction: Rajasthan High Court

Early in 2019, the Confederation of All India Traders (CAIT) filed a case against Amazon and Flipkart in the Rajasthan High Court, seeking a stay on festive season sales by e-tailers such as Amazon and Flipkart. The traders’ bodies have filed a writ petition saying Amazon and Flipkart are violating FDI norms, asking the court to direct the government to take action against them.

According to a CAIT statement, a Jodhpur bench of the High Court has issued notices to the Ministry of Commerce and Industry, Flipkart India, its marketplace entity, Flipkart Internet, and Amazon Seller Services.

CAIT has alleged that the marketplaces were influencing the price of goods sold on their websites which clearly violated the level-playing field for other traders. In its allegation, it said that the two e-commerce firms were engaging in deep discounting, predatory pricing, loss-funding as well as inventory control.

The case is pending for hearing.

Amazon declined to comment for this story.