Anoushka Chauhan

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Introduction

On 9^th August 2021, the Supreme Court upheld the Karnataka High Court’s order dismissing Amazon and Flipkart’s pleas against the probe directed by the Competition Commission of India (“CCI”) into alleged anticompetitive practices by the e-commerce giants.[1] The Delhi Vyapar Mahasangh, a society of MSME traders dealing in smartphones filed an information before the CCI against Amazon and Flipkart under Section 19(1)(a) of the Competition Act, 2002 (“the Act”), alleging that the companies had violated Sections 3(1) and 3(4) of the Act by engaging in anti-competitive practices such as deep discounting and preferential listing. On refusing to interfere with the CCI’s probe into the companies, the Supreme Court has seemingly altered its position from the case of CCI v. Bharti Airtel Ltd. & Ors. (“Bharti Airtel case”) wherein it ousted the CCI’s jurisdiction in favor of the Telecom Regulatory Authority of India (“TRAI”). This article, to that effect, will examine the decision in both Amazon Seller Services Pvt. Ltd. & Anr. v. CCI and Ors. (“Amazon decision”) and Bharti Airtel Case as well as the relevant precedents relied upon in the cases, to determine what is the correct position of the CCI’s jurisdiction, over another entity, pending investigation would be.

Factual Matrix

Amazon

Delhi Vyapar Mahasangh (“DVM”), a society of Micro, Small and Medium Enterprises (“MSME”) dealing primarily with smartphones and related products, filed an information before the CCI under Section 19(1)(a) of the Act, alleging e-commerce giants Amazon and Flipkart of engaging in practices that are anti-competitive under Sections 3(1) and 3(4) of the Act. The DVM sought an order for investigation under Section 26(1) of the Act, which was passed by the CCI on January 13, 2020.[2] Amazon and Flipkart filed writ petitions in the Karnataka High Court to quash the order, which was dismissed on 11th June.[3]

The DVM accused the corporations for engaging in several malpractices, including preferential treatment for smartphone sellers either affiliated with or controlled by it, deep discounting, (where the preferred sellers are offered incentives to sell their products at ‘predatory prices’ to the detriment of other sellers), and forming exclusive tie-ups that attract more preference in terms of sales. The effect of these practices is that only certain affiliated sellers are promoted, creating a “defacto exclusivity to the detriment of other sellers,”[4] the result of which is independent vendors being driven out of business.[5]

Flipkart and Amazon relied on the Bharti Airtel case to state that the CCI cannot investigate the companies as there is a pending Enforcement Directorate (“ED”) investigation under Foreign Exchange Management Act (“FEMA”), due to which CCI’s jurisdiction can only be exercised after the ED returns its findings.

Bharti Airtel: 

In Bharti Airtel case, Reliance Jio alleged that other telecom service providers were not providing its sufficient Points of Interconnection, thereby discriminating and forming a ‘cartel.’ Since the telecom sector is regulated by the TRAI, the contention on part of the accused entities was that the inter-party disputes should be settled by the Telecom Disputes Settlement and Appellate Tribunal. The Supreme Court in this case held that the TRAI, as a sectoral regulator would oust the CCI’s authority to decide on jurisdiction facts. It was held that the CCI could proceed into examining whether the parties’ conduct had an anti-competitive effect after the TRAI returned its findings .[6]

Analysis of CCI’s Jurisdictional Conflict

By upholding the CCI’s jurisdiction in the Amazon case, the Supreme Court has opened up an integral question of the extent of the CCI’s jurisdiction when it clashes with the jurisdiction of another authority. The key difference lies in the nature of the authority with whom the jurisdiction  clashes. In Bharti Airtel, the conflict was with the TRAI, which is a sectoral regulator. In the Amazon  case, the conflict was with the ED, which is a quasi-judicial body.

Bharti Airtel discussed the authority of the TRAI, as a sectoral regulator to “issue directions, from time to time, to the service provider.” The Supreme Court held that the TRAI would be better equipped to deal first with the jurisdictional facts as “not only [do they] arise out of the telecom licenses granted to the service providers, the service providers are governed by the TRAI Act and are supposed to follow various regulations and directions issued by the TRAI itself.” Since the TRAI’s specific objectives are to tackle the very issues constituting the Bharti Airtel dispute, it is better equipped to decide on the jurisdictional facts of the case.[7] Thus, where a statutory authority specifically regulates the sector wherein the dispute arises, the Competition Act is in and of itself not sufficient to deal with the issue and can determine the anti-competitive effect of the agreements only after the sectoral regulator has returned its findings. Thus, the CCI’s jurisdiction can only be made contingent on the sectoral regulator’s findings on the jurisdictional facts if they could be better answered by the regulator.  In contrast to this, the ED is a quasi-judicial body, cloaked with none of the powers that a sectoral regulator has. This distinction was further highlighted in the case of Lafarge Umiam Mining Pvt. Ltd., v. Union of India, where a regulator was described as a ‘pro-active body’ that can frame statutory Rules and Regulations, the mechanism for which invites public discussion and participation.[8] The ED does not have any of these functions or characteristics. In this regard, the apex Court relied on several cases, such as S. Sukumar v. Secretary, Institute of Chartered Accountants in India & Ors., where it was held that a statutory body could proceed with an investigation despite pending investigations by the ED or Registrar of Companies (ROC).[9]

Furthermore, reference must be made to the case of Monsanto Holdings Pvt. Ltd. v. CCI,[10] where the Delhi High Court explained that the petitioners, by relying on the Bharti Airtel decision to oust the CCI’s jurisdiction in favour of the Controller of Patents (compared to a sectoral regulator), had erred in stating that it was solely the nature of the sectoral regulator that had lent the TRAI primacy to decide on jurisdictional facts. Rather, it is the scope and focus of the two competing legislations that must be considered, and whether there is any overlap or conflict between them. In the present instance, the Competition Act focuses on regulating and promoting free markets, while the FEMA seeks to consolidate existing laws to encourage Foreign Exchange markets in India, and the FDI policy does not exempt an entity from the law.[11] Therefore, since the objective and scope of the two Acts is entirely different, there is no discernible conflict between the CCI’s jurisdiction, and the purpose of the ED’s investigation under FEMA. 

The decision also emphasized the role of Section 60 of the Competition Act, which states that the Act’s provisions have an overriding effect over all other laws in India. Additionally, Section 62 states that the Act is not in derogation to any other laws, further lending to the above claim that the CCI exercising jurisdiction in this case would not be in derogation to the ED’s investigation. 

Concluding Remarks

Therefore, a sectoral regulator may be given primacy to decide on jurisdictional facts if it is better equipped to do so, and as quasi-judicial bodies do not have the same regulatory function pertaining to a specific sector, the same conflict with the Act does not arise. It can be inferred that the Amazon decision has not changed the position of the Supreme Court from what it was in Bharti Airtel, but has further fleshed out the difference based on the nature of the investigating authority. Thus, when the sectoral regulator has returned its findings if better equipped to answer jurisdictional facts, the CCI’s mechanism may be activated based on such findings. On the other hand, where the conflict is between the CCI and a quasi-judicial body, which does not have the authority to issue directions pertaining to the specific sector, then the CCI may proceed with a probe despite a pending ED investigation. Ultimately, when a contention over the jurisdiction of the CCI arises, the most important factor in consideration is which authority is better equipped to answer the jurisdictional facts of the case, and whether the object and purpose of the Competition Act creates a conflict with the competing authority in question.

REFERENCE

¹SLP(C) No.-011558 / 2021. Available at: https://main.sci.gov.in/supremecourt/2021/16978/16978_2021_31_27_29263_Order_09-Aug-2021.pdf.

²Case No. 40 of 2019. Available at: https://www.cci.gov.in/sites/default/files/40-of-2019.pdf.

³2021 SCC OnLine Kar 12626.Available at: https://karnatakajudiciary.kar.nic.in/judgements/WP_3363_2020_connected_matters.pdf.

⁴Id.

⁵See, Aditya Kalra, Amazon documents reveal company’s secret strategy to dodge India’s regulators, Reuters Special Report. Available at: https://www.reuters.com/investigates/special-report/amazon-india-operation/.

⁶(2019)2 SCC 521.

⁷Id. 

⁸(2011)7 SCC 338.

⁹(2018)14 SCC 360.

¹02020 SCC OnLine Del 598.

¹12021 SCC OnLine Kar 12626.