Delhi High Court agrees to hear Cloudtail's challenge against CCI raids on July 15

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The Delhi High Court has agreed to hear Cloudtail's challenge to the raids conducted on its premises by the Competition Commission of India (CCI) as part of the competition watchdog's probe against e-commerce giants Amazon and Flipkart.

In an order passed on June 3, the high court said that the matter requires consideration and in the interim directed the Director-General of the CCI to ensure that the details pertaining to the search and seizure exercise conducted against Cloudtail are not divulged to any third party or made public.

Cloudtail, which used to be a significantly large seller on Amazon, moved the high court challenging the CCI's action against it, on the grounds that it is not a named party in the case for which the investigation is conducted. Cloudtail argued before the court that even the CCI names it as a third party in the case and as such, raids cannot be conducted against the company.

The petition pertains to the raids conducted by CCI at end of April reportedly to ascertain financial interests or linkages, if any, between the online marketplace platforms and the sellers.

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The investigation against e-commerce platforms Amazon and Flipkart was launched in 2020 after a Delhi-based traders' association had alleged that they were engaging in anti-competitive practices by allowing preferential listings of certain preferred sellers. This investigation was challenged before the Karnataka High Court, which ultimately allowed the probe to be carried out. The raids against Cloudtail and certain other firms are part of this investigation.

Questioning the sustainability of the raids against it, Cloudtail makes a case for itself on the grounds that it was not a named party in the investigation that was upheld by the Karnataka High Court. The Indian law on competition law does not allow for search and seizure to be conducted against third parties, the company argues before the Delhi High Court on June 3 as it pressed for a stay on the probe against it.

The CCI on the other hand, defending its action, highlighted that the central point of the investigation is the alleged special arrangement between marketplaces and their preferred sellers. The order for the probe names Cloudtail as a preferred seller which validates the raids against it.

The high court's single-judge bench of Justice Yashwant Verma took note of Cloudtail's stance that the company itself was not accused of violations of the provisions of the Competition Act in the CCI's probe order and the raids would be unwarranted in this case.

Stating that the matter requires further consideration, the high court said that it will hear the case next on July 15, while passing an interim order for non-disclosure of probe details in the meantime. The probe itself has not been halted.