TaxTMI 
TaxTMI 
2021 (6) TMI 1141
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....ecting an investigation under Section 26(1) of the Competition Act, 2002 ('Act' for short) by the Director General ['DG' for short]. Facts of the case: 2. Amazon and Flipkart have averred that they are private limited Companies. They operate 'Online Market Places' on which, products listed for sale, are owned and sold by third parties. 3. Amazon has pleaded that it also provides certain support services to third party sellers to facilitate sale of goods. Those services are integral and non-separable from retail trade and include warehousing, packing, shipment, delivery/return of products centralized payment processing, refund etc. 4. Delhi Vyapar Mahasangh (respondent No.2) is a Society comprising of Micro, Small and Medium Enterprises registered under the Societies Registration Act, 1860. It has filed information alleging contravention of Section 3(1) read with Section 3(4) and Section 4(1) and 4(2) of the Competition Act and sought directions for investigation under Section 26(1) of the Competition Act. Upon consideration of the said information, Commission has passed the impugned order. 5. The main grounds urged on behalf of petitioners are: ....
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....ission of India [(2019) SCC Online Bombay 3038], the Hon'ble High Court of Bombay has held that to initiate investigation, it would be necessary for Commission to come to a prima facie view with regard to practices complained of and if they result or likely to result in some AAEC; * Three jurisdictional facts are necessary. Firstly, there must be an agreement, secondly, such agreement must be between the enterprises situated at different levels of the production or supply chain and thirdly, such agreement should cause or likely to cause AAEC. These requirements have not been satisfied. Therefore, there is no application of mind; * The informant has come with unclean hands. CAIT has filed writ petitions before High Courts of Delhi and Rajasthan on similar issues. In the writ petition filed before Delhi High Court, based on the statement made by the learned Standing Counsel for the Central Government, direction has been issued to the Directorate of Enforcement to examine whether there is any violation of FDI [Foreign Direct Investment] Policy. As CAIT has failed to obtain favourable orders before the High Courts, it has approached the Commission by using Delhi V....
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.... the conclusion recorded in the impugned order; * In Bharathi Airtel, Hon'ble Supreme Court of India has held that High Courts would not be competent to adjudge the validity of an order made under Section 26(1) of the Act nor review it on merits; * It is alleged by the informant that petitioners have entered into vertical agreements with 'preferred sellers' and this has led to foreclosure of 'nonpreferred sellers' from the Online Market places; * Commission has analyzed several aspects in the context of violation of Section 3(4) of the Act and the complexity involving the parameters of 'interplatform', 'intra-platform' and 'inter-channel distribution'. Commission has recorded the existence of preferred sellers, preferential listing etc., in the impugned order; * Paragraphs No.21 to 26 of the impugned order contain detailed discussions with regard to petitioners' conduct; * Commission has taken into consideration the factual instances alleged by the informant and reports in public domain which provide for the exact number of mobile phones launched in the year 2018, which is 45 and 67 on the plat....
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....rality' arises from a situation where an e- Commerce Platform acts both as Market place and a Competitor; * Exclusive agreements and deep discounting raise potential competition concern, as an e-Commerce Platform with market power can thwart competition by entering into exclusive contracts; * Foreign Direct Investment in e-Commerce is regulated by FDI Policy. e-Commerce business is not regulated by any specific sectoral regulator. An entity engaged in e-Commerce and having no foreign investment will not be required to follow the FDI Policy or any Press note. Foreign Investment related aspects can be investigated by the concerned authorities under Foreign Exchange Management Act, 1999 ['FEMA' for short]. However, issues relating to 'Exclusive Agreement', 'Preferred Sellers' and 'Deep discounting' which may have adverse effect on the competition in the e-Commerce market in India are within the realm of the Act and therefore, must be left for exclusive enquiry by the Commission; * Commission is not the only anti-trust regulator which has initiated enquiry against Amazon. European Commission, in July 2019 has initiated form....
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..... What is the nature of the impugned order passed under Section 26(1) of the Act? B. Whether a prior notice and opportunity of hearing is mandatory at the stage of issuing direction to the Director General to hold inquiry under Section 26(1) of the Act? C. Whether impugned order calls for interference? Re. Points A & B 13. Both points A & B are inter-connected and hence they are dealt together. 14. The preamble of the Act states that, keeping in view the economic development of the Country, Competition Act has been brought for establishment of a Commission to prevent practices having adverse effect on competition, to promote and sustain competition in the markets, to protect the interests of consumers and to ensure 'freedom of trade' carried on by other participants in the market in India. 15. Under Section 19 of the Act, the Commission may inquire into allegation of contravention of provisions of the Act either on its own motion or on receipt of any information accompanied by such fee as may be determined by the Regulations or upon a reference made by the Central Government or a State Government or a Statutory Authority. 16. Delhi Vyapar Ma....
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.... Retail. 'Omnitech Retail' is owned by Consulting Rooms Pvt. Ltd., whose Director Ajay Sachdeva was also a Director of WS Retail till September 2016. * Preferential Listing 23. It is alleged that Amazon perpetuates the practice of listing its preferred sellers in the first few pages of the search results, thereby creating a search bias. In number of search results, the products are sold by preferred sellers such as 'Appario Retail' and 'Cloudtail' and they dominate the first few pages, whereas, products with same ratings, which are sold by non-preferred sellers are listed in later pages. 24. Flipkart lends the words 'assured' to the products sold by its preferential sellers. * Exlusive Tie-ups 25. It is alleged that petitioners herein have several exclusive tie-ups and private labels, which get more preference in terms of sales. 26. It is further alleged that providing discounts and preferential listing to preferential sellers creates defacto exclusivity to the detriment of other sellers. 27. Thus, in substance, informant's case is, though petitioners claim that 'any person' can sell his product in their market ....
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....hem to anoint them as preferred sellers. It is further denied that there is a common director between the petitioner and either Cloudtail India or Appario Retail." (Emphasis supplied) 30. He contended that, obviously, Frontizo and Amazon Retail India Pvt. Ltd., shall have common business interest and this is fortified by the fact that both companies have a common Director namely, Sameer Kshetrapal. 31. Shri. Abhir Roy further submitted that on Flipkart Market Place, Omnitech Retail is the preferred and favoured seller. The said Trademark is registered in the name of 'Consulting Rooms Pvt. Ltd.', of which Ajay Sachdeva is one of the Directors. Earlier, he was a Director on the board of WS Retail. He submitted that Flipkart also practices selling its own inventory at discounted prices to its preferred sellers. Flipkart also indulges in 'loss funding' in case of preferred sellers as recorded in Flipkart India Pvt. Ltd., Vs. Assistant Commissioner of Income Tax in ITA No.202 & 693/Bang/2018 (Annexure-10 to the informant's Statement of Objections). 32. On the aspect of 'cash burning', Smt. Madhavi Diwan, Learned Addl. Solicitor General, adverting to....
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....ct confidentiality that is expected to be maintained by the Commission in terms of Section 57 of the Act and Regulation 35 of the Regulations. xxx 71. The intimation received by the Commission from any specific person complaining of violation of Section 3(4) read with Section 19 of the Act, sets into motion, the mechanism stated under Section 26 of the Act. Section 26(1), as already noticed, requires the Commission to form an opinion whether or not there exists a prima facie case for issuance of direction to the Director General to conduct an investigation. This section does not mention about issuance of any notice to any party before or at the time of formation of an opinion by the Commission on the basis of a reference or information received by it. Language of Sections 3(4) and 19 and for that matter, any other provision of the Act does not suggest that notice to the informant or any other person is required to be issued at this stage. In contradistinction to this, when the Commission receives the report from the Director General and if it has not already taken a decision to close the case under Section 26(2), the Commission is not only expected to forward the ....
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....) 1201 : (2010) 2 SCC (L&S) 133], wherein this Court was primarily concerned with the High Court dismissing the appeals without recording any reasons. The Court also examined the practice and requirement of providing reasons for conclusions, orders and directions given by the quasi-judicial and administrative bodies. xxx 97. The above reasoning and the principles enunciated, which are consistent with the settled canons of law, we would adopt even in this case. In the backdrop of these determinants, we may refer to the provisions of the Act. Section 26, under its different sub-sections, requires the Commission to issue various directions, take decisions and pass orders, some of which are even appealable before the Tribunal. Even if it is a direction under any of the provisions and not a decision, conclusion or order passed on merits by the Commission, it is expected that the same would be supported by some reasoning. At the stage of forming a prima facie view, as required under Section 26(1) of the Act, the Commission may not really record detailed reasons, but must express its mind in no uncertain terms that it is of the view that prima facie case exists, requirin....
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....ovisions of the Act, sets into motion the mechanism stated under Section 26 of the Act. At this stage, the Commission is required to form an opinion whether or not there exists a prima facie case. 39. The informant has alleged violation of Sections 3(1) read with 3(4) and Sections 4(1) read with 4(2) of the Act, by the petitioners. In the impugned order, Commission has recorded that the Act does not provide for inquiry into the cases of Joint/Collective dominance and proceeded further to deal with the violation under Section 3 of the Act. 40. Perusal of the impugned order from paragraph No.20, shows that the Commission has examined the material produced by the informant. It has analyzed the information under various heads such as exclusive launch of mobile phones, preferred sellers on the market places, deep discounting, and preferential listing of private labels. It has recorded that mobile manufacturing Companies like One plus, Oppo and Samsung have exclusively launched several of their models on Amazon and Vivo, Realme, Xiomi etc., have exclusively launched several of their models on the Flipkart. Commission has noticed that Flipkart has launched 67 mobile phones and Amazo....
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.... no notice is necessary at the stage of 26(1) of the Act. Therefore, the said ground is untenable. 48. It was contended by Shri. Gopal Subramanium, Shri. Udaya Holla, Shri. Dhyan Chinnappa, learned Senior Advocates that the informant had not approached with clean hands and acted as a front-man for CAIT which has filed writ petitions in High Courts of Delhi and Rajasthan and failed to get any favourable order. They pointed out that the Demand Draft for Rs.50,000/- tendered along with the information was obtained by CAIT and argued that informant has not approached the Commission with clean hands. 49. Countering this argument, Smt. Madhavi Diwan, submitted that so far as Commission is concerned, what is relevant is the 'information'. With regard to CAIT approaching through Delhi Vyapar Mahasangh, placing reliance on following passage in Swaraj Infrastructure (P) Ltd. Vs. Kotak Mahindra Bank Ltd.[(2019)3 SCC 620] , she submitted that when a citizen/litigant is driven to wall, he blows hot and hotter. "29. When secured creditors like the respondent are driven from pillar to post to recover what is legitimately due to them, in attempting to avail of more than one remedy a....
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....tigation by the Enforcement Directorate, Shri. Abhir Roy submitted that ED is not a regulator but a quasi-judicial body. Placing reliance on Lafarge Umiam Mining Pvt. Ltd., Vs. Union of India and Others [(2011)7 SCC 338 (paragraph No.122)], he submitted that the regulator is a pro-active body with power to frame statutory Rules and Regulations. Regulatory mechanism warrants open discussion, public participation, and circulation of draft paper inviting suggestions. ED is not clothed with those powers and does not have other attributes. Therefore, ED is not a regulator. 54. It was next contended by learned Senior Advocates for petitioners that the Commission has substantially altered the decision in CCI Vs. SAIL with regard to confidentiality and Web-hosting of the impugned order which adversely affects petitioners' business reputation. 55. In reply, Smt. Madhavi Diwan, submitted that decision in CCI Vs. SAIL does not mandate any blanket confidentiality. She argued that paragraphs No. 38 and 135(e) of the said judgment, state that confidentiality is to be maintained only in terms of provisions of Section 57 read with Regulation 35. She rightly contended that Section 57 mere....
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....udicially as to tarnish its 20 2018 SCC OnLine Del 11229 (paragraph No.44) reputation. The CCI has not as yet examined the investigation report in the light of Cadila's contentions; all rights available to it, to argue on the merits are open. (Emphasis supplied) 56. In response to petitioner's contention that CCI could not have taken a contrary stand to the one taken in AIOVA case, Smt. Madhavi Diwan submitted that there is no res judicata in the case of orders passed by CCI because, Competition Act relates to preservation of competitive forces in the market place. She submitted that the Hon'ble Supreme Court of India has held in Samir Agrawal Vs. Competition Commission of India [2020 SCC Online SC 1024], that Competition Act operates in 'rem' and not in 'personam', since it concerns public interest. Placing reliance on Cadila Healthcare Limited and Anr Vs. CCI,[2018 SCC OnLine Del 11229 (paragraph 59)] she submitted that the CCI or an expert body should ordinarily not be crippled or hamstrung in their efforts by application of technical rules of procedure. 57. With regard to the market study aspect, Smt. Diwan submitted that market study ....
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....the principles of natural justice, or refuse to exercise a jurisdiction vested in them, or there is error apparent on the face of the record, and such act, omission, error, or excess has resulted in manifest injustice. However extensive the jurisdiction may be, it is not so wide or large as to enable the High Court to convert itself into a Court of appeal and examine for itself the correctness of the decision impugned and decide what is the proper view to be taken or the order to be made. 60. In T.C. Basappa Vs. T. Nagappa and Another [AIR 1954 SC 440], it is held that a tribunal may be competent to enter upon an enquiry but in making the enquiry it may act in flagrant disregard of the rules of procedure or where no particular procedure is prescribed, it may violate the principles of natural justice. A writ of certiorari may be available in such cases. An error in the decision or determination itself may also be amenable to a writ of certiorari but it must be a manifest error apparent on the face of the proceedings, e.g. when it is based on clear ignorance or disregard of the provisions of law. In other words, it is a patent error which can be corrected by certiorari but not a m....
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....n approved by the House of Commons, the guidance being concerned with the limits of public expenditure by local authorities and the incidence of the tax burden as between taxpayers and ratepayers. Unless and until a statute provides otherwise, or it is established that the Secretary of State has abused his power, these are matters of political judgment for him and for the House of Commons. They are not for the judges or your Lordships' House in its judicial capacity." "For myself, I refuse in this case to examine the detail of the guidance or its consequences. My reasons are these. Such an examination by a court would be justified only if a prima facie case were to be shown for holding that the Secretary of State had acted in bad faith, or for an improper motive, or that the consequences of his guidance were so absurd that he must have taken leave of his senses ...." (Emphasis supplied) 62. Noted jurist, Shri. V. Sudhish Pai, in his Article 'Is Wednesbury on the Terminal decline?'[(2008)2 SCC J-15] has opined that the Wednesbury test, long established as ground of judicial review will be applicable in examining the validity of the exercise of admini....