Introduction:

The Supreme Court of India set aside the 2020 order of the National Company Law Appellate Tribunal which had directed a probe by the Director General of the Competition Commission of India into alleged violations of the Competition Act by an e commerce platform. The appeal arose from proceedings initiated on a complaint by the All India Online Vendors Association alleging abuse of dominant position and predatory pricing. The Bench comprising Chief Justice of India Surya Kant Justice Joymalya Bagchi and Justice Vipul Pancholi remanded the matter to the NCLAT for fresh consideration after accepting the contention that the earlier order relied substantially on income tax assessment observations which had subsequently been set aside by the Income Tax Appellate Tribunal. The Supreme Court clarified that all issues were kept open for reconsideration in accordance with settled principles of competition law.

Arguments on Behalf of Flipkart:

Senior Advocate Dr Abhishek Manu Singhvi appearing for Flipkart Internet Private Limited contended that the essential jurisdictional requirement for invoking Section 4 of the Competition Act namely the existence of dominance in the relevant market was completely absent. It was submitted that there was no finding by the Competition Commission of India that Flipkart was a dominant player in the online marketplace. On the contrary the CCI had expressly concluded that Flipkart did not enjoy a dominant position and therefore no case of abuse of dominance could arise.

It was further argued that the NCLAT erred in relying upon observations made by an Assessing Officer in income tax proceedings. Those observations related to the business model of Flipkart India Private Limited which is a business to business wholesale entity and not the online marketplace entity Flipkart Internet Private Limited. The income tax assessment order itself had been set aside by the Income Tax Appellate Tribunal and therefore could not form the foundation of a competition law probe.

Reliance was placed on the principles laid down by the Supreme Court in Coal India Limited where strict tests were prescribed for determining dominance and abuse. Dr Singhvi submitted that none of those tests were satisfied in the present case. It was also argued that Amazon was in fact the dominant player in the relevant market and that market realities were ignored by the NCLAT.

Senior Advocate Rajshekhar Rao for Flipkart India Private Limited supplemented the arguments by pointing out that the assessment proceedings were confined to Flipkart India which had a minuscule market share and operated in a distinct wholesale segment. The findings in those proceedings could not be mechanically extended to Flipkart Internet Private Limited which operates the online marketplace.

Arguments on Behalf of the Informant and Authorities:

Counsel appearing for the All India Online Vendors Association submitted that the Income Tax Appellate Tribunal had reversed the assessment order primarily on questions of law and that certain factual observations regarding the business model were not expressly disturbed. It was argued that the NCLAT was justified in drawing prima facie conclusions based on material available on record to order a probe.

The informant reiterated allegations that large sellers were being favoured on e commerce platforms resulting in exclusion of small vendors and distortion of competition. It was contended that such practices warranted a detailed investigation by the Director General and that the threshold for ordering a probe at the prima facie stage was low.

Judgment:

The Supreme Court after hearing the parties held that the NCLAT order could not be sustained in its present form. The Court noted that the NCLAT had relied significantly on observations made by an Assessing Officer in income tax proceedings which had already been set aside by the Income Tax Appellate Tribunal. In such circumstances the continuation of a competition law probe solely on that basis was legally untenable.

The Bench clarified that it was not expressing any opinion on the merits of the allegations or on the question of dominance and abuse. All issues were expressly left open. The Court observed that the NCLAT must re examine the matter independently and apply the settled principles laid down by the Supreme Court in a catena of decisions including Coal India Limited.

The Court directed that the appeal be decided afresh by the NCLAT. The parties were granted full liberty to raise all their respective contentions including on the existence of a prima facie case and on whether remand to the Competition Commission of India for investigation was warranted. Accordingly the impugned order of the NCLAT was set aside and the matter was remanded for fresh consideration.