Karnataka High Court Reserves Orders On Pleas Challenging CCI Probe Into Amazon, Flipkart-Linked Sellers

A single-judge bench of Justice M. Nagaprasanna, after hearing the parties, reserved the judgment.

Senior Advocate K.G. Raghavan, appearing for Rocket Kommerce LLP and related petitioners, argued that while the Competition Commission of India may direct investigations upon forming a prima facie opinion under Section 26(1) of the Competition Act, such direction in the present case was limited to Flipkart and Amazon and was not an open-ended mandate.

Distinguishing the position from Cadila Healthcare Ltd. v. CCI, he argued that unlike in cases where the Commission issues broad directions, the present order of 2020 clearly confined the investigation to specific opposite parties, and therefore the Director General could not add new parties without a fresh direction from the Commission.

He submitted that the Director General exceeded his authority by treating the petitioners, who were initially issued notices as third parties and had furnished information under Section 41, as opposite parties without obtaining prior approval under Regulation 24 of the CCI (General) Regulations, 2009. It was argued that the Director General cannot act suo motu or expand the scope of investigation to new parties, though expansion of subject matter may be permissible.

Senior Advocate Sajan Poovayya, appearing for one of the petitioners, argued that the Competition Commission of India's Director General is bound by the Section 26(1) order and has no suo motu power to add new parties. He said while the DG may expand the subject matter of inquiry, it cannot expand it to new persons without a specific CCI direction.

He submitted that while the DG may broaden the subject matter of investigation (for example, from a Section 3 violation to Section 4), this flexibility is limited only to the same party already under investigation. He said the DG cannot expand the inquiry to new persons/entities without a specific direction from the CCI. Thus, “subject matter expansion” is permissible, but “party expansion” is not.

He stressed that parties have key rights at the DG stage, like producing evidence and cross-examination and denial of these rights makes the process defective. Relying on the case of Schott Glass India Pvt Ltd v CCI, he argued that such defects cannot be cured later before the CCI, thereby vitiating the proceedings.

Senior Advocate Dhyan Chinnappa, also appearing for petitioners, submitted that such expansion violates principles of natural justice, particularly the right to cross-examination and effective participation at the investigation stage. He argued that denial of these rights vitiates the proceedings and cannot be cured at a later stage.

Background

The proceedings originate from information filed by Delhi Vyapar Mahasangh alleging anti-competitive conduct by Flipkart and Amazon in the online smartphone market. By order dated January 13, 2020, the Commission found a prima facie case and directed investigation.

On 9 August 2024, the CCI submitted investigation reports finding that Amazon and Flipkart had engaged in anti-competitive practices, including preferential treatment to select sellers, exclusive arrangements, and deep discounting.

The present writ petitions, including that filed by Rocket Commerce LLP, have been instituted challenging the Director General's action of treating them as opposite parties despite being initially proceeded against only as third parties, contending that such reclassification without a fresh direction from the Commission is without jurisdiction and contrary to the statutory framework, violating the principles of natural justice.