India’s regulatory scrutiny of e-commerce giants has both Walmart-owned Flipkart and Amazon reportedly fed up.
A report from Reuters indicates that Flipkart asked India’s Supreme Court to restrain the Competition Commission of India (CCI), the country’s antitrust regulator, after what the online retailer called an “invasive” investigation into its e-commerce business.
Amazon made a similar request of the Supreme Court, Reuters reports, saying the CCI had sought a “wealth of sensitive information within a deadline as short as 15 days.”
Walmart and Amazon did not immediately respond to Sourcing Journal’s request for comment.
In a 700-page court filing not publicly available, Flipkart illustrated its level of concern over the investigation, which has prompted public spats between U.S firms and the Indian government.
This isn’t the first time the companies have petitioned the Indian judicial system to intervene in an investigation into their business practices. In June, an Indian high court dismissed pleas by both Flipkart and Amazon to halt the CCI’s antitrust investigation into their business practices.
The court decision enabled the regulator to proceed with its probe against both companies into whether they had entered into anti-competitive agreements in violation of the Competition Act of 2002.
Both India’s Ministry of Commerce and Industry and the high court have said the companies should not shy away from inquiries, but Amazon and Flipkart maintain that the CCI lacked evidence and should not have launched the investigation last year.
In the investigation, the CCI sought a list of Flipkart’s top sellers, online discounts and partnerships with smartphone makers, among 32 questions it asked on July 15. This appeared to be what set off Flipkart, which told the Supreme Court the details sought reinforced its fear of the “invasive nature” of the investigation, the report said.
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The watchdog also asked for a list of Flipkart’s top 100 sellers between 2015 to 2020, as well as its top-selling products.
From there, the retailer asked it to put on hold both the information request and the overall investigation. Flipkart has until July 30 to answer the queries.
India’s online retailing ecosystem is still emerging, with sales hitting $60.5 billion in 2020, according to research from GlobalData, which projects sales nearly doubling by 2024 to an anticipated $111.3 billion.
Yet even in a market that should be fair game for all newcomers, Flipkart and Amazon take up the majority of business. According to Forrester Research, by October 2020, Flipkart had 31.9 percent market share, making it the largest online retailer in India. Meanwhile, Amazon India was slightly behind in second place, with a 31.2 percent market share.
With two foreign-owned parties leading the e-commerce charge, India’s government has scrambled to adapt to the nascent e-commerce industry in an effort to assist smaller, domestic players.
Currently, India’s e-commerce regulations prevent foreign online retailers from both holding inventories of goods and selling them directly to customers. Instead, they must only collect fees from vendors selling products on their marketplace. E-commerce marketplaces, regardless of origin, also cannot mandate that merchants sell any product exclusively on their platforms.
The latter scenario is a major point of contention from trade groups such as Confederation of All India Traders (CAIT) and Delhi Vyapar Mahasangh (DVM), both of whom accused Flipkart and Amazon of promoting some “preferred sellers” and hurting business for smaller players.
A Reuters investigation in February detailed the actions Amazon took from 2012 from 2019 to get around India’s strict e-commerce regulations, including publicly misrepresenting ties with its major sellers Cloudtail and Appario (which it has a joint venture stake in) and giving preferential treatment to a small subset of sellers.
As IPO looms, Flipkart doubles down on BNPL
The conflict comes at a time when Flipkart appears to be closer to going public, with the e-commerce giant reeling in $3.6 billion in funding earlier this month. Walmart, which owns 75 percent of the $37.6 billion company as of the new funding, is seeking a $50 billion valuation before it files an IPO.
Flipkart is furthering its aim to be a “do it all” destination for online Indian consumer sby growing its role in the “buy now, pay later” space. While Flipkart Pay Later has seen a year-over-year increase of over 50 percent in the number of registered users as of July 21, the company now is targeting a 2X growth in customers over the next six months.
Customers have used the offering mainly for purchases across categories of beauty and general merchandise, home and lifestyle, the company said. In the lifestyle category, Flipkart Pay Later has exceeded credit card transactions, making it the top prepaid instrument used by consumers for the category.