Supreme Court sets aside NCLAT order of probe against Flipkart under Competition Act, asks to reconsider

The dispute traces back to March 4, 2020, when the NCLAT had overturned a CCI order closing AIOVA’s complaint and held that, prima facie, Flipkart had violated Section 4 of the Competition Act (Representative image)

• Supreme Court sets aside NCLAT's 2020 order for probe into Flipkart's practices
• Matter sent back to NCLAT for fresh decision on Competition Act investigation
• No conclusion on Flipkart's market dominance or abuse of position yet

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The Supreme Court on Tuesday reopened the controversy over whether an investigation is required into Flipkart’s business practices under the Competition Act, by setting aside a 2020 order of the National Company Appellate Tribunal (NCLAT) that had directed a probe by the Director General.

The apex court remitted the matter to the NCLAT for a fresh decision, asking it to reassess the issue without relying on findings that no longer hold the field.

A bench comprising Chief Justice of India (CJI) Surya Kant, Justice Joymalya Bagchi and Justice Vipul Pancholi clarified that nothing has been concluded on merits.

“We request the NCLAT to decide the appeal afresh, keeping in mind the principles stated by this Court in a catena of decisions, including in Coal India Ltd. The parties will be at liberty to raise their respective contentions for the purpose of determining whether a prima facie case is made out, and if so, whether further remand of the case to the CCI is warranted,” the bench observed.

Senior Advocate Abhishek Manu Singhvi, appearing for Flipkart Internet Pvt Ltd, argued that the appellate tribunal’s 2020 ruling rested heavily on observations made by an Assessing Officer during income tax proceedings, even though those findings were later overturned by the Income Tax Appellate Tribunal.

According to him, there has never been a determination that Flipkart holds a dominant position in the relevant market or that it abused such dominance.

He also pointed out that the Competition Commission of India (CCI) had earlier concluded that Flipkart was not dominant, and maintained that Amazon was the dominant player in the online marketplace.

At one stage of the hearing, the CJI suggested that the matter be sent back so the NCLAT could examine factors other than the now-invalid assessment order. Counsel for the All India Online Vendors' Association (AIOVA), which had originally approached the CCI, countered that the ITAT interfered with the assessment order only on legal grounds, while leaving intact certain remarks on the business model.

Senior Advocate Rajshekhar Rao, representing Flipkart India, submitted that the income tax assessment related to Flipkart India Pvt Ltd, a wholesale B2B entity with a very small market share, whereas the online marketplace operations are run by Flipkart Internet Pvt Ltd.

He contended that findings concerning one entity were incorrectly applied to the other.

The dispute traces back to March 4, 2020, when the NCLAT had overturned a CCI order closing AIOVA’s complaint and held that, prima facie, Flipkart had violated Section 4 of the Competition Act, 2002 dealing with abuse of dominant position and predatory pricing.

Earlier, on November 6, 2018, the CCI had rejected the vendors’ allegations, stating that the business practices of Flipkart and Amazon did not breach competition law.