Amazon and Flipkart Under Fire: Indian Antitrust Investigation Uncovers Preferential Treatment and Deep Discounting
By Aditya Kalra
NEW DELHI (Multibagger) - An Indian antitrust investigation has determined that U.S. e-commerce giants Amazon (NASDAQ: AMZN) and Walmart (NYSE: WMT)'s Flipkart violated local competition laws by favoring select sellers on their platforms, as per confidential reports accessed by Multibagger.
The Competition Commission of India (CCI) initiated a probe in 2020 to investigate allegations that Amazon and Flipkart were promoting specific sellers with whom they had business arrangements, thereby giving these sellers preferential treatment in product listings.
In comprehensive reports—1,027 pages on Amazon and 1,696 pages on Flipkart, both dated August 9—the CCI investigators concluded that both companies had developed an ecosystem where preferred sellers consistently appeared higher in search results, effectively sidelining other sellers.
"Each of the anti-competitive practices alleged ... were investigated and found to be true," confirmed both reports, which have not been made public and are being reported by Multibagger for the first time. "Ordinary sellers remained as mere database entries," the reports stated in identical conclusions for both companies.
As of now, Amazon, Flipkart, and the CCI have not responded to Multibagger' requests for comments. Both companies have previously denied any wrongdoing, asserting that their practices comply with Indian laws.
The companies will now review the findings and have the opportunity to file objections before the CCI decides on any potential penalties.
This investigation marks another setback for Amazon and Flipkart in India, where they have faced continuous criticism from smaller retailers. These retailers claim their businesses have been adversely affected due to the deep discounts offered by the e-commerce giants.
The investigation was prompted by a complaint from the Delhi Vyapar Mahasangh, a group representing brick-and-mortar retailers.
Amazon and Flipkart are leading players in India's e-retail market, which Bain & Company estimates was worth $57-60 billion in 2023 and is projected to reach $160 billion by 2028.
In the United States, the Federal Trade Commission has sued Amazon, alleging that the company employs "anticompetitive and unfair strategies to illegally maintain its monopoly power." Amazon has countered that the FTC lawsuit is misguided and would harm consumers by leading to higher prices and slower deliveries.
Preferential Listing and Deep Discounting
Indian investigators raided several sellers associated with Amazon and Flipkart during the probe. This followed a 2021 Multibagger investigation based on internal Amazon documents which revealed that the company had been favoring a small group of sellers on its platform to circumvent Indian laws. Amazon has denied these allegations, but the CCI informed an Indian court that the Multibagger report supported its evidence against Amazon.
The CCI report on Amazon indicated that preferred sellers gained an advantage in online listings, drawing customer attention away from other sellers. The practice of preferential listings and deep discounting—particularly in the mobile phone segment—has had a "catastrophic impact on the existing competition in the market."
Similarly, the CCI report on Flipkart noted that preferred sellers received various services such as marketing and delivery at minimal costs. Flipkart also enabled these sellers to offer deep discounts on mobile phones, amounting to "predatory pricing" that stifled competition.
"The anti-competitive practices are not limited to sales of mobile phones. They are equally prevalent in other categories of goods," stated both reports.
For months, Flipkart and Amazon attempted to block the investigation through legal challenges, but the Supreme Court of India allowed it to proceed in 2021.
Last month, India's commerce minister publicly criticized Amazon, stating that the company's investments were often used to offset business losses. In June of last year, Amazon announced plans to increase its investment in India to $26 billion by 2030, including for its cloud business. The company also aims to achieve $20 billion in merchandise exports from India by 2025.
Breaking It Down: What This Means for You
For Consumers: While the findings might suggest that Amazon and Flipkart's practices lead to lower prices, the long-term impact could be fewer choices and higher prices as competition diminishes.
For Small Retailers: This investigation validates longstanding complaints that big e-commerce players have been unfairly squeezing out smaller competitors through preferential treatment and deep discounting.
For Investors: Regulatory scrutiny and potential penalties could impact the financial performance of Amazon and Flipkart in one of their most important growth markets. Stay tuned for how the companies respond and if any changes in their business practices are announced.
Understanding these dynamics is crucial for making informed decisions, whether you're a consumer, a small business owner, or an investor.