An extensive antitrust investigation by Indian authorities has unraveled evidence that major US e-commerce giants Amazon and Walmart's Flipkart have breached local competition laws.
The newly unsealed reports detail how both companies accorded preferential treatment to select sellers on their platforms at the expense of smaller competitors.
The Competition Commission of India launched the investigation in 2020 after receiving complaints about anti-competitive practices. In two voluminous reports, one 1,027 pages long on Amazon and another 1,696 pages long on Walmart’s Flipkart, both dated 9 August, the CCI details how the companies had tampered with algorithmic searches to favor certain sellers with whom they already had dealings.
This, in effect, simply crowds other sellers out by making these preferred sellers appear high in search results.The reports detail how the special treatment turned average sellers into database entries while giving favored partners every visibility boost. The CCI now says this practice caused severe disruption to market competition through predatory pricing and deep discounting strategies.
These findings have come as a big blow to both Amazon and Flipkart, criticized for their way of conducting business in India. Small retailers and trade bodies, like the Delhi Vyapar Mahasangh and the Confederation of All India Traders, commonly known as CAIT, have been accusing these e-commerce giants of leveraging their market position to eliminate competition. CAIT has welcomed the investigation findings released by the CCI and intends to take the matter to the federal government.
The result of this investigation is also out at a time when many such companies are coming under greater scrutiny around the world. In the US alone, Amazon is fighting an FTC lawsuit on similar anticompetitive practices.
The Indian e-retail market is estimated to be worth US$57-60 billion in 2023 and is expected to grow past US$160 billion by 2028. That makes the country a very key battlefront for global e-commerce players. Indeed, both Amazon and Flipkart have invested huge sums in the region. Recently, Amazon announced that it is going to invest US$26 billion in India before 2030, in addition to its pledge to increase merchandise exports from the country.
However, these companies may face substantial regulatory actions under the findings of the CCI report. The probe also underlines a bigger problem besetting India's retail market, the concentration of a few large players and a battle for smaller rivals to survive.
With Amazon and Flipkart ready to go through the reports for final arguments and replies to potential penalties, this case underlines how important effective antitrust enforcement is in e-commerce markets that are seeing rapid evolution.