Karnataka High Court
Flipkart Internet Pvt Ltd vs Competition Commission Of India on 23 July, 2021
Author: Satish Chandra Rangaswamy
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 23RD DAY OF JULY, 2021
PRESENT
THE HON'BLE MR. JUSTICE SATISH CHANDRA SHARMA
AND
THE HON'BLE MR. JUSTICE NATARAJ RANGASWAMY
WRIT APPEAL NO.562/2021
C/W WRIT APPEAL NO.563/2021 (GM-RES)
WA NO 562 OF 2021
BETWEEN
FLIPKART INTERNET PVT LTD
HAVING ITS REGISTERED OFFICE
AT BUILDING ALYSSA BEGONIA
AND CLOVER
EMBASSY TECH VILLAGE
OUTER RING ROAD,
DEVARABEESANAHALLI VILLAGE
BENGALURU 560103,
THROUGH ITS AUTHORISED SIGNATORY
MR PRADEEP REDDY
...APPELLANT
(By SRI HARISH SALVE, SENIOR ADVOCATE
ALONG WITH SRI DHYAN CHINNAPPA, SENIOR ADVOCATE
ALONG WITH ARJUN P.K, VINUTA WAMAN, RAYADURG,
SHARDUL, AMARCHAND, NISHA KAUR UBEROI AND
ANURADHA AGNIHOTRI)
AND
1. COMPETITION COMMISSION OF INDIA
OFFICE BLOCK -1,
KIDWAI NAGAR (EAST)
OPPOSITE RING ROAD,
NEW DELHI 110023,
THROUGH ITS SECRETARY
2
2. DELHI VYAPAR MAHASANGH
NO 877, 1ST FLOOR,
QUTUB RAOD,
SADAR BAZAR, DELHI 110006,
THROUGH ITS SECRETARY
3. AMAZON SELLER SERVICES PVT LTD
BRIGADE GATEWAY 26/1,
DR RAJKUMAR ROAD,
BENGALURU 560055
REP BY ITS AUTHORISED REPRESENTATIVE
4. CONFEDERATION OF ALL INDIA TRADERS
A SOCIETY REGISTERED UNDER THE
SOCIETIES REGISTRATION ACT 1860
(AS APPLICABLE TO NCT OF DELHI)
HAVING OFFICE AT
VYAPAR BHAVAN NO 925/1,
NAIWALAN, KAROL BAGH
NEW DELHI 110005
...RESPONDENTS
(BY SMT.MADHAVI DIWAN,
ADDITIONAL SOLICITOR GENERAL FOR R-1
ALONG WITH SRI ABIRROY, ADVOCATE FOR R2,
SRI. GOPALA SUBRAMANIYAN, SENIOR ADVOCATE
ALONG WITH SRI NIKHIL JOY, ADVOCATE FOR R3
SRI GOUTAMADITYA S, ADVOCATE FOR R4)
THIS WRIT APPEAL IS FILED U/S 4 OF THE KARNATAKA HIGH
COURT ACT PRAYING TO SET ASIDE THE IMPUGNED ORDER DATED
11/06/2021 PASSED BY THE LEARNED SINGLE JUDGE OF THIS
HON'BLE HIGH COURT OF KARNATAKA, BANGALORE IN
WP NO.4334/2020 CONSEQUENTLY, SET ASIDE THE CCI ORDER
DATED 13/01/2020 IN CASE NO.40/2019, BEFORE THE CCI AND ETC.
WA NO 563 OF 2021
BETWEEN
AMAZON SELLER SERVICES PRIVATE LIMITED
A PRIVATE LIMITED COMPANY
INCORPORATED UNDER THE
COMPANIES ACT 1956 AND
HAVING ITS REGISTERED OFFICE
AT 8TH FLOOR, BRIGADE GATEWAY, 26/1,
DR RAJKUMAR ROAD,
3
BENGALURU-560055
REPRESENTED HEREIN BY ITS
AUTHORIZED SIGNATORY
MR RAHUL SUNDARAM
...APPELLANT
(By SRI GOPALA SUBRAMANIYAN, SENIOR ADVOCATE
ALONG WITH SRI NIKHIL JOY, ADVOCATE )
AND
1. COMPETITION COMMISSION OF INDIA
THROUGH THE CHAIRPERSON,
9TH FLOOR, OFFICE - OPPOSITE RING ROAD,
BLOCK-1, EAST KIDWAI NAGAR,
KIDWAI NAGAR,
NEW DELHI-110023
2. DELHI VYPAARMAHASANGH
877, 1ST FLOOR, QUTAB ROAD,
SADAR BAZAR,
DELHI-110006
3. FLIPKART INTERNET PRIVATE LIMITED
BUILDINGS ALYSSA,
BEGONIA AND CLOVER,
EMBASSY TECH VILLAGE,
OUTER RING ROAD,
DEVARABEESANAHALLI VILLAGE,
BENGALURU-560103
4. CONFEDERATION OF ALL INDIA TRADERS
TRADERS VYAPAR BHAWAN,
NO.925/1,
NAIWALAN, KAROL BAGH,
NEW DELHI-110005
...RESPONDENTS
(By SMT. MADHAVI DIWAN, ADDITIONAL SOLICITOR GENERAL
SRI. ABIRROY, ADVOCATE FOR R2,
SRI. HARISH SALVE, SENIOR ADVOCATE ALONG WITH
SRI.DHYAN CHINNAPPA, SENIOR ADVOCATE ALONG WITH
SRI. ARJUN P.K., SMT.VINUTA WAMAN,
SRIYUTHA RAYADURG, SHARDUL, AMARCHAND,
MANGAL DAS & CO., SMT. NISHA KAUR OBEROI ALONG WITH
SMT.ANURDADAHA AGNIHOTRI, ADVOCATES FOR R3
SRI GOUTHAMADITYA, ADVOCATE FOR R4)
4
THIS WRIT APPEAL IS FILED U/S 4 OF THE KARNATAKA HIGH
COURT ACT PRAYING TO ALLOW THE APPEAL BY SETTING ASIDE THE
ORDER AND JUDGMENT DATED JUNE 11, 2021 PASSED BY THE
LEARNED SINGLE JUDGE IN W.P.NO.3363/2020 C/W 4334/2020
(GM-RES) AND ETC.,
THESE WRIT APPEALS COMING ON FOR ORDERS AND
HAVING BEEN HEARD AND RESERVED FOR JUDGMENT ON
25.6.2021, THIS DAY SATISH CHANDRA SHARMA J.,
PRONOUNCED THE FOLLOWING:
JUDGMENT
Regard being had to the similitude in the controversy
involved in these two cases, they were heard analogously
together and a common judgment is being passed.
2. The present writ appeals are arising out of the
common order passed by the learned Single Judge dated
11.6.2021 in W.P.No.3363/2020 c/w W.P.No.4334/2020, by
which the learned Single Judge has dismissed the writ petitions
filed by both the petitioners.
3. The appellant-Flipkart Internet Private Limited is a
Private Limited Company incorporated under the Companies Act,
1956 having its registered office at Bengaluru, Karnataka and it
operates as an e-commerce platform and online marketplace,
which facilitates independent third party sellers to sell goods to
consumers. The appellant has about 200 million registered
users and 15 million transacting customers per month.
3.1. The facts of the case reveal that respondent
No.2/Delhi Vyapar Mahasangh filed an information on
24.10.2019 to Competent Commission of India (CCI) under
Section 19(1)(a) of the Competition Act, 2002 (hereinafter
referred to as the Act) against both the appellants alleging that
the appellants are involved in alleged anti-competitive practices
and conduct, such as deep discounting, preferential listing, sale
of private label brands through preferential sellers and exclusive
tie-ups, alleged to be in violation of Section 3(1) r/w Section
3(4) of the Act.
3.2. It has been further stated that the CCI, based upon
the information received by it, has passed an order dated
13.1.2020 in case No.40/2019 directing an investigation under
Section 26(1) of the Act by the Director General. The order
dated 13.1.2020 was challenged before this Court and the
learned Single Judge has dismissed the writ petitions by an order
dated 11.6.2021, which is under challenge in the present two
writ appeals.
3.3. The appellant-Flipkart has challenged the legality
and validity of the order passed by the learned Single Judge and
a main ground has been raised stating that the learned Single
Judge has acted contrary to the judgment of the Supreme Court
of India in the case of Competition Commission of India v.
Steel Authority of India Ltd. & Anr., reported in (2010) 10
SCC 744, (hereinafter referred to as CCI v. SAIL) while
upholding the order passed by the Competition Commission of
India (hereinafter referred to as CCI). It has been contended
that the Hon'ble Supreme Court in CCI v. SAIL has held that the
CCI while passing an order under Section 26(1) of the
Competition Act, 2002 (hereinafter referred to as the Act of
2002) must express its mind in no uncertain terms that it is of
the view that prima facie case exists, requiring general issuance
of direction for investigation to the Director General (paragraph
97). It has been further contended that the order passed by the
CCI in the present case is merely speculative in nature and it has
not given any finding on the contravention of the provisions of
the Act of 2002. It has been further contended that the learned
Single Judge has erroneously upheld the order passed by the
CCI on the basis that the order passed by the CCI is supported
by some reasoning. Therefore, the impugned order upholding
the order passed by the CCI is contrary to the judgment of the
Hon'ble Supreme Court delivered in the case of CCI v. SAIL.
3.4. Learned Senior counsel for the appellant has
contended that the learned Single Judge while upholding the CCI
order has erred in observing that the scope of judicial review is
limited and that the CCI order records "some reasons". Section
26 (1) of the Act empowers the CCI to pass an order directing
the Director General to carry out an investigation where, "it is of
the opinion that there exists a prima facie case..." and a plain
reading of Section 26 establishes the following:
(i) The CCI can act on the receipt of a reference from
the Central/State government or a statutory
authority or on its own knowledge "or information
received under Section 19".
(ii) The material in its possession must lead the CCI to
form an opinion that there exists a prima facie case.
3.5. It has been contended that as explained by the
Hon'ble Supreme Court in CCI v. SAIL, "the Commission is
expected to form its opinion as to the existence of a prima facie
case for contravention of certain provisions of the Act and then
pass a direction to the Director General to cause an investigation
into the matter..." and the said paragraph, which is at
paragraph 37 of the judgment reads as under;
"37. As already noticed, in exercise of its powers, the
Commission is expected to form its opinion as to the existence
of a prima facie case for contravention of certain provisions of
the Act and then pass a direction to the Director General to
cause an investigation into the matter. These proceedings are
initiated by the intimation or reference received by the
Commission in any of the manners specified under Section 19 of
the Act. At the very threshold, the Commission is to exercise its
powers in passing the direction for investigation; or where it
finds that there exists no prima facie case justifying passing of
such a direction to the Director General, it can close the matter
and/or pass such orders as it may deem fit and proper. In other
words, the order passed by the Commission under Section
26(2) is a final order as it puts an end to the proceedings
initiated upon receiving the information in one of the specified
modes. This order has been specifically made appealable under
Section 53-A of the Act."
3.6. It has been further contended that it is settled law
that even where the statute requires the authority conferred with
the power to order an investigation to form an opinion, the
opinion must be in writing, meaning thereby it must record
"minimum reasons substantiating the formation of such opinion."
Additionally, the order must unequivocally express the mind of
the authority that "it is of the view that a prima facie case
exists". The statute requires this; no more but equally no less.
3.7. Learned Senior counsel for the appellant has
contended that the parameters for judicial review are now well
settled, where the law requires the formation of an opinion, the
repository of power, who is required to form an opinion before
exercising the power, must take into account all relevant facts,
eschew the relevant facts and material, and appropriately
instruct itself in law (Barium Chemicals Ltd v. Company Law
Board, AIR 1967 SC 295). It has been further contended, the
Hon'ble Supreme Court in the Bharti Airtel Case has recognised
the test for determining whether writ petition would be
maintainable against the formation of an opinion was the one
laid down in the Constitution Bench decision in the Barium
Chemicals Case.
3.8. It has been further contended that the scope of
judicial review of administrative orders is now well established.
Where the statute requires the authority to form an opinion, one
of the ground of judicial review is that the authority did not form
an opinion in accordance with law. This would be where:
(i) the authority has taken into account irrelevant or
extraneous considerations,
(ii) the authority has failed to take into account
relevant considerations and
(iii) the authority has misdirected itself in law.
3.9. It has been contended by the learned Senior counsel
for the appellant that, the CCI Order was challenged by the
appellant/Flipkart inter alia on the grounds that:
(i) The CCI Order failed to express its mind in no
uncertain terms that the CCI was of the view that a
prima facie case exists requiring a direction to the
director-general to cause an investigation;
(ii) The CCI Order fails to examine whether the alleged
agreements were of the kind so as to attract
Section 3 (4) of the Act; and
(iii) The CCI Order failed to take into account (on its
own admission on Vol. 4, p. 400-401- CCI
affidavit) the provisions of Section 19 in forming
an opinion that there was a prima facie case of
appreciable adverse effect on competition (AAEC).
On a misdirection of law that the provision did not
apply at this stage.
3.10. It has been further contended that the facts
indisputably establish that the appellant/Flipkart operates an
online marketplace platform on which independent third parties
and sellers sell their wares. The appellant is neither the seller
nor a buyer of goods. The allegations against the appellant were
that:
(i) There are certain sellers who are designated
"assured sellers" (conveniently mischaracterised as
preferred sellers) and such designation by the
appellant violated section 3(4) of the Act;
(ii) There are certain situations in which the appellant
offered "deep discounts" to certain sellers, and
(iii) in relation to mobile phones, some of the
manufacturers had exclusivity agreements with the
appellant, thereby violating section 3 (4) of the
Act.
3.11. It has been contended that the CCI failed to examine
whether, assuming that the allegations were established on an
investigation (their veracity was seriously in dispute), the
agreements complained of would be violative of Section 3(4) of
the Act. It has been further contended that another fatal flaw in
the CCI Order is, the failure of the CCI to examine whether the
alleged agreements are between persons are enterprises at
different stages or levels of the production chain.
3.12. It has been contended that the phrase "production
chain" would necessarily imply that the arrangement/agreement
relates to a product or a group of products made by a
manufacturer. If multiple manufacturers of a product enter into
an agreement, it is a matter to be examined under Section 3(3)
of the Act. Where the different persons at different stages acting
under a manufacturer enter into an agreement, such an
agreement, being between persons at different stages or levels
of the production chain, would be such as to qualify for further
examination under Section 3(4) of the Act.
3.13. It has been further contended that the fundamental
requirement is that the person entering into an agreement
should be a part of a production chain, which commences from
the manufacturer and ends with the retailer. It has been further
contended that the appellant is not a retailer and is not in the
business of (in fact is prohibited from) selling goods and cannot
be considered to be a part of the production chain. It has been
stated that admittedly the appellant operates a platform on
which a large number of sellers, dealing with diverse
commodities, sell their goods. Hence, the appellant cannot be
treated as a part of the production chain for all the goods sold on
its platform.
3.14. It has been stated that in the present case, on a
perusal of the submissions made by the CCI, it is clear that the
CCI proceeded on the premise that the requirement of the
agreement relating to entities at different stages or levels of the
production chain was not a sine qua non, since other agreements
would also fall in the latter words of the provision. It has been
further contended that the CCI thus misdirected itself in law. An
analysis of the material paragraphs in the CCI Order as well as
the submissions made by the CCI makes it apparent that the CCI
has not considered the factors in Section 19(3) while passing the
CCI Order. This is another fundamental misdirection in law and
amounts to a failure to take into account relevant considerations
while forming the prima facie opinion. It has been further stated
that the CCI has asserted on affidavit before the learned Single
Judge that Section 19 is not considered at the stage of Section
26(1) of the Act. During the oral submissions before the learned
Single Judge, the CCI took the position that the word "inquiry"
in Section 19(1) must mean that Section 19(3) does not come
into play at the stage of formation of opinion under Section
26(1) of the Act. This construction by the CCI is in the teeth of
Section 19 of the Act.
3.15. It has been contended that the CCI's submission that
Section 19 is not required to be considered at the stage of
passing an order under Section 26(1) is plainly wrong as Section
19(1) refers to an inquiry at its commencement. Section 19 (1)
recognises the power of inquiry of the regulator (the CCI) into
any alleged contravention of Section 3 or Section 4. Section
19(1) recognises that the CCI may conduct an inquiry on receipt
of any information or either on its own motion. In the event of
receipt of information, the CCI cannot rely on newspaper reports
(such reports having been liberally cited in defence of the CCI
Order) but on information received in such manner as may be
determined by the regulations. Sections 19(3) and 19(4) of the
Act set out the matters which the "commission shall" have due
regard to while engaging in a matter. The statute compels that
the CCI shall give due regard to the enumerating factors.
3.16. It has been contended that the submission of the
CCI that reading in the requirements of Section 19(3) of the Act
at the stage of forming an opinion under Section 26(1) would
stultify the working of the law is deeply unattractive and is
contrary to the language used in the provision itself ("the
Commission shall ... have due regard to..."). It has been further
contended that when the CCI is applying its mind to a set of
allegations or information in its possession, in order to form an
opinion as to whether there has been a prima facie violation of
Section 3, it must consider the factors referred to in Section 19
(3). However, as has been laid down by the Hon'ble Supreme
Court in CCI v SAIL, the level of examination would be only
prima facie. At the second stage after receiving a report under
Section 26, and when finally deciding the matter, the CCI would
again be required to have regard to the factors set out in Section
19(3), this time to give a final finding and not merely a prima
facie view. There is no reason to suggest that if the CCI is
required to have regard to the factors in Section 19(3), it would
emasculate its powers to order investigations in appropriate
cases. In any event, the above submission by the CCI is contrary
to judgment of the Division Bench of the Bombay High Court in
Star India v CCI, 2019 SCC Online Bom 3038 (the Star Case),
which is binding on the CCI.
3.17. Learned Senior counsel for the appellant has
contended that the CCI Order failed to meet the jurisdictional
threshold, i.e., "formation of an opinion in no uncertain terms"
which is a sine qua non for passing an order under Section 26
(1) of the Act. This has been settled by the Hon'ble Supreme
Court of India in CCI v. SAIL (2010) 10 SCC 744. Heavy
reliance has been placed upon paragraphs 37, 97 and 98 and the
same reads as under;
Para 37 (as extracted above in Para 3 of the present
submissions);
"97. ...Section 26, under its different sub-sections,
requires the Commission to issue various directions, take
decisions, conclusions 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, requiring issuance of direction for
investigation to the Director General. Such view should be
recorded with reference to the information furnished to
Commission. Such opinion should be formed on the basis of
records, including the information furnished and reference made
to the Commission under the provisions of the Act, as
aforereferred... In other words, the Commission is expected
to express prima facie view in terms of Section 26(1) of the
Act, without entering into any adjudicatory or determinative
process and by recording minimum reasons substantiating
the formation of such opinion, while all its other orders and
decisions should be well reasoned."(CC, p. 44)
"98. Such an approach can also be justified with reference
to Regulation 20(4), which requires the Director General to
record, in his report, findings on each of the allegations made by
a party in the intimation or reference submitted to the
Commission and sent for investigation to the Director General,
as the case may be, together with all evidence and documents
collected during investigation. The inevitable consequence is
that the Commission is similarly expected to write
appropriate reasons on every issue while passing an
order under Sections 26 to 28 of the Act."(CC, p. 44)
It has been stated that as per the aforesaid judgment, the
Hon'ble Supreme Court has summarised the issue involved as
under:
a. At the stage of Section 26(1) of the Act, the CCI is expected
to examine the information and other material on record;
b. On the basis of such examination, the CCI must form an
opinion whether there exists a prima facie case of
contravention of the provisions of the Act;
c. Such opinion must be recorded in the prima facie order of
directing an investigation, which order must show expression
of an opinion in "no uncertain terms";
d. The opinion must be "substantiated" in the order with
reasons. Though the CCI may not record detailed reasons, it
is required to give "minimum reasons" and yet most
importantly, such reasons should substantiate the "formation
of an opinion" and should do so in "no uncertain terms".
These requirements make it apparent that the need for
substantiation and the determination in no uncertain terms
are peremptory. Minimal reasons is only a matter of length
and never of weight of reasons;
e. Such an opinion must be made with reference to the material
on record;
f. The CCI is required to give reasons on every issue raised
before it whilst passing an order under Section 26(1) of the
Act.
3.18. It has been contended that the CCI Order in the
present case fails to meet the aforesaid jurisdictional threshold,
as it does not record "formation of an opinion" in "no uncertain
terms". In other words, there is no mention of formation of an
opinion by the CCI on any contravention of the provisions of the
Act by the appellant. It is further contended that the CCI Order
merely reiterates the allegations of the Informant and makes
some cursory remarks, stating that the allegations 'merit an
investigation'. It has been further contended that there is not
even a single instance in the CCI Order (and the CCI has also
failed to demonstrate the same before this Court from the CCI
Order or otherwise from the material available), wherein the
CCI, assuming all the allegations against the appellant to be true
and correct, concludes that such allegations constitute a
contravention of the provisions of the Act. In the absence of
such a "formation of an opinion", leave alone being
"substantiated" even by "minimum reasons", the CCI Order has
been passed contrary to the provisions of Section 26(1) of the
Act itself and deserves to be set aside by this Hon'ble Court.
3.19. It has been further contended that the CCI Order is
bad in law as it has changed the test for the exercise of the
powers under Section 26 (1) of the Act from a "prima facie case
of contravention of the Act" to a "prima facie case for
investigation". In respect of the aforesaid ground, the following
observations in the CCI order have been referred:
a. "Whether funding of discounts is an element of the exclusive
tie-ups is a matter that merits investigation."
b. "Thus allegations are interconnected, and warrant a
holistic investigation to examine how the vertical
agreements operate, what are the key provisions of such
agreements and what effect do they have on competition."
c. "It needs to be investigated whether the alleged exclusive
arrangements, deep-discounting and preferential listing by
the OPs are being used as an exclusionary tactic to foreclose
competition and are resulting in an appreciable adverse
effect on competition ...."
d. "...the Commission is of the opinion that there exists a prima
facie case which requires an investigation by the DG to
determine whether the conduct of the Ops have resulted in
..."
3.20. Learned Senior counsel for the appellant has stated
that a perusal of the above in itself demonstrates that the CCI
has erred by applying the incorrect test while exercising its
power under Section 26(1) of the Act. It has been further
contended that this issue goes to the root of the matter and
unequivocally establishes that it is fit case for judicial review by
this Hon'ble Court. The fact that the CCI has incorrectly
interpreted the provisions of Section 26(1) of the Act and has
applied the wrong test is evident from:
a. CCI v. SAIL (2010) 10 SCC 744, Para 37 ;
b. Judgement of the Hon'ble High Court of Delhi (Division
Bench) in Google Inc v. CCI, 2015 SCC OnLine Del 8992,
wherein the Hon'ble High Court of Delhi has held that CCI
can order/direct investigation only if forms a prima facie
opinion of violation of provisions of the Act.The Hon'ble Court
held:
"18(R) Again, as aforesaid, CCI can
order/direct investigation only if forms a prima
facie opinion of violation of provisions of the Act
having been committed. Our Constitutional values
and judicial principles by no stretch of
imagination would permit an investigation where
say CCI orders/directs investigation without
forming and expressing a prima facie opinion or
where the prima facie opinion though purportedly
is formed and expressed is palpably
unsustainable. The remedy of Article 226 would
definitely be available in such case."
It is contended that in view of the above, it is apparent that
the threshold jurisdictional test for exercise of power under
Section 26(1) of the Act is formation of an opinion on "prima
facie case of contravention of the Act" and not an opinion on
"prima facie case for investigation". The CCI has evidently failed
to apply the correct test, i.e., failed to prima facie establish
contravention of the provisions of the Act by the appellant, as
has been demonstrated in the above paragraph, and on this
count alone, the CCI Order deserves to be set aside. The learned
Single Judge has also failed to appreciate these facets and pre-
requisites, and accordingly the Impugned Order too deserves to
be set aside.
3.21. It has been contended that in response to the
aforesaid submission of the appellant, the CCI made the
following submissions:
a. An order under Section 26(1) of the Act is a mere
administrative order and CCI is not required to undertake
any adjudicatory exercise;
b. In an order under Section 26(1), the CCI is required to form
only a preliminary / tentative opinion;
c. An order under Section 26(1) of the Act entails no civil
consequences;
d. The CCI is merely required to record "some reasons" at the
26(1) stage;
e. The CCI has deliberately passed an order directing an
investigation with minimal reasons, as a detailed order may
influence the DG during its investigation against the
appellants.
3.21.1. It is stated that the appellant made the following
submissions in response to the above submissions of CCI:
Regarding an order under Section 26(1) of the Act is a mere
administrative order and CCI is not required to undertake any
adjudicatory exercise, it has been stated that the CCI Order is an
administrative order may not be of any assistance to the CCI in
the present case, as the CCI Order (as has been elaborated
above) is contrary to the judgment of the Hon'ble Supreme
Court in CCI v. SAIL and such submission of the CCI also
completely ignores the judgment of the Hon'ble Supreme Court
in Bharti Airtel Ltd v. CCI& Ors., (2019) 2 SCC 521 and
Barium Chemicals Ltd v. Company Law Board, AIR 1967 SC
295. The Hon'ble Supreme Court in the Bharti Airtel Case has
recognised in paragraph 118 that the test for determining
whether a writ petition would be maintainable against the
formation of an opinion was the one laid down in the
Constitution Bench decision in the Barium Chemicals case.
Despite the aforesaid judgment of the Hon'ble Supreme Court,
the CCI has taken an incorrect position that judgment of the
Hon'ble Supreme Court in Barium Chemicals case is inapplicable
to the present case.
3.21.2. It has been stated that the Hon'ble Supreme Court
in Barium Chemicals Case has held that if it could be shown that
an authority which was required to form an opinion "had in fact
not formed an opinion, its order could be successfully
challenged." The Hon'ble Supreme Court had in the said case
held that:
"10. ... It is only after the formation of certain opinion by
the Board that the stage for exercising the discretion
conferred by the provision is reached. The discretion
conferred to order an investigation is administrative and
not judicial since its exercise one way or the other does not
affect the rights of a company nor does it lead to any
serious consequences as, for instance, hampering the
business of the company. As has been pointed out by this Court
in Raja Narayanalal Bansilal v. Maneck Phiroz Mistry [1961 1
SCR 417] the investigation undertaken under this provision is
for ascertaining facts and is thus merely exploratory. The scope
for judicial review of the action of the Board must, therefore, be
strictly limited. Now, if it can be shown that the Board had
in fact not formed an opinion its order could be
successfully challenged. This is what was said by the Federal
Court in Emperor v. Shibnath Banerjee [1961 6 FCR 1 : AIR
1943 FC 75] and approved later by the Privy Council. Quite
obviously there is a difference between not forming an opinion
at all and forming an opinion upon grounds, which, if a court
could go into that question at all, could be regarded as inapt or
insufficient or irrelevant. It is not disputed that a court cannot
go into the question of the aptness or sufficiency of the grounds
upon which the subjective satisfaction of an authority is based.
..."
It has been contended that a perusal of the above makes it
apparent that :
a. The Hon'ble Supreme Court in the Bharti Airtel Case had held
that the principles laid down by the Hon'ble Supreme Court
in the case of Barium Chemicals Case would be applicable to
judicial review of an order under Section 26(1) of the Act;
b. The Hon'ble Supreme Court in the Barium Chemicals case
was examining the scope of judicial review of an
administrative order. Even in the said case, the Hon'ble
Supreme Court was not examining an adjudicatory order;
c. The Hon'ble Supreme Court in the Barium Chemicals case
was also considering validity of an order directing an
investigation against an entity / individual. It must be noted
that even an order under Section 26(1) of the Act refers the
matter to the DG for investigation.
d. The Hon'ble Supreme Court in the Barium Chemicals case
had held that the discretion to refer the matter to
investigation can only be exercised after formation of an
opinion;
e. In the absence of a formation of an opinion, the order can be
successfully challenged by way of a writ petition.
3.21.3. Learned Senior counsel for the appellant has
contended that applying the aforesaid principles to the facts of
the present case, since the CCI has failed to form an opinion of a
prima facie breach of Section 3(4) of the Act and record its
reasons in "no uncertain terms" in its order, the CCI Order
should be set aside. Merely because the order is categorised as
administrative in nature, the same cannot be a reason to allow
an order to be sustained, even though the same has been
passed without satisfying the threshold jurisdictional test
required for passing such an order. It has been further
contended that it is also settled law that when a statutory
authority passes an order based on certain grounds, its validity
must be judged by the reasons mentioned in the order and
cannot be supplemented or improved by fresh reasons in the
shape of affidavit or otherwise. The order should be res ipsa
loquitor (Mohinder Singh Gill v. Chief Election Commr.,
(1978) 1 SCC 405, para 8; Punjab State Leather v. Bandeep
Singh, (2016) 1 SCC 724, para 4). However, the learned Single
Judge erroneously allowed all sorts of additional reasons to be
adduced in affidavits and submissions by the CCI's officers,
which reasons are not articulated in the CCI Order, and such
post facto affidavits cannot be relied upon to substitute or
improve upon the reasoning provided in the CCI order.
3.21.4. Regarding an Order under Section 26(1), the CCI is
required to form only a preliminary/tentative view, it has been
contended by the learned counsel for the appellant that the CCI
having failed to satisfy the jurisdictional threshold of "formation
of an opinion" itself, cannot be permitted to defend its order by
stating that an order under Section 26(1) of the Act is merely a
preliminary/tentative view. In other words, even if the
submission made by the CCI is accepted, the CCI Order fails to
record any view of contravention of the provisions of the Act
leave alone preliminary/tentative view. A preliminary or tentative
view does not mean that the opinion is sans intelligible reasons.
Even on this count, even assuming the submission made by the
CCI to be correct, the CCI Order deserves to be set aside as the
CCI has failed to establish a prima facie of contravention of the
provisions of the Act in certain terms, as it is required to do so
under Section 26(1) of the Act.
3.21.5. Regarding an Order under Section 26(1) entails no
civil consequences, it has been contended that the
commencement of an investigation under Section 26(1) of the
Act against an entity involves substantial and significant civil
consequences for the said entity. This issue has already been
dealt with and decided by the Hon'ble High Court of Delhi in
Google Case , wherein the High Court was pleased to observe as
under:
"18(N) The Supreme Court, in Rohtas Industries (Supra)
and the Calcutta High Court in New Central Jute Mills Co. Ltd.
(Supra), cited by the counsel for the respondent No. 2 /
complainant, also has held that an investigation against a public
company tends to shake its credit and adversely affect its
competitive position in the business world even though in the
end it may be completely exonerated and given a character
certificate and that the very appointment of Inspector (in that
case under Section 237 (b) of Companies Act to investigate the
Company's affairs) is likely to receive much press publicity as a
result of which the reputation and prospects of the Company
may be adversely affected"
3.21.6. It has been contended that a direction of
investigation against an entity under the Act entails the following
serious consequences:
(a) Reputational harm/ loss of goodwill;
(b) Significant managerial time spent on the investigation,
given that the DG can call for information and
deposition(s); and,
(c) Legal and other costs.
3.21.7. It has been contended by the learned Senior counsel
for the appellant that it is for this reason that the CCI is required
to ensure that its order passed under Section 26 (1) of the Act
complies with the mandatory prerequisites of law, i.e., threshold
jurisdictional test, which requires the formation of an opinion of
contravention of the provisions of the Act 'in no uncertain terms'.
This is also relevant given that the DG has the power to expand
the scope of the investigation and conduct a fishing inquiry.
3.21.8. It has been further contended that the investigation
by the Director General involves an intrusive and free-ranging
inquiry into every aspect of an entity's business including in
relation to an entities commercially sensitive information, which
has a tremendous impact on the entity being investigated. For
the purposes of carrying out an investigation, the DG has been
conferred with "the same powers as are vested in a civil court"
under the Code of Civil Procedure 1908, while trying a suit.
These specifically include the power to (i) summon and enforce
the attendance of any person; and (ii) direct the discovery and
production of documents. Failure to comply with any direction of
the DG has been made punishable with fine of up to INR 1 crore.
The commencement of an investigation under Section 26(1) of
the Act involves substantial and significant civil consequences.
It has been stated that if the intention of the legislature was to
permit an investigation into every allegation that may be made,
the requirement of formation of a "prima facie opinion" would
never exist in the Act. This specific requirement imposed by the
law on the CCI is significant and mandatory and requires
compliance which compliance must be disclosed from the
reasons as contained in the order under Section 26(1) in no
uncertain terms.
3.21.9. It has been contended that the High Court of Delhi
in the Google case has held that the powers of the Director
General during such an investigation are far more sweeping and
wider than the powers of investigation conferred on the Police
under the Code of Criminal Procedure 1973. It has been stated
that the Delhi High Court in the Google case has observed as
under;
"18(E) It would thus be seen that the powers of the DG
during such investigation are far more sweeping and wider
than the power of investigation conferred on the Police under
the Code of Criminal Procedure. While the Police has no power
to record evidence on oath, DG has been vested with such a
power."
3.21.10. It is stated that therefore, it may not be correct to
aver that an order under Section 26(1) does not entail any civil
consequences. On the contrary, an order under Section 26(1)
has very serious consequences, which casts an additional
responsibility on the CCI to ensure that the jurisdictional
threshold are satisfied prior to referring a matter for
investigation under Section 26(1) of the Act.
3.21.11. It has been contended that the CCI relied on
Cadila Healthcare v CCI, (2018) 252 DLT 647(Cadila Case) to
argue that there is no harm to business reputation due to an
inquiry under Section 26(1) of the Act. However, the reliance on
the Cadila Case is misplaced and erroneous, given that the
Cadila Case has been challenged before the Hon'ble Supreme
Court and the Hon'ble Supreme Court has passed an interim
order that no coercive steps can be undertaken, and as such, the
reliance on the Cadila Case is misplaced. It is stated that the
CCI has sought to rely on the number of informations received
and number of cases directed for investigation. It is further
stated that the same is irrelevant for the purposes of the present
case, as the validity of the CCI Order will be examined solely on
the basis of reasons set out in the CCI Order alone and not on
the basis of number of other cases directed for investigation by
the CCI.
3.21.12. It has been contended that the CCI averred before
the learned Single Judge that the proceedings under Section 26
of the Act are time-bound and should not be delayed in the
interest of a free and fair market and economy. It is further
contended that the CCI is mandated under the provisions of the
Act to only direct an investigation after forming a prima facie
opinion of contravention of the provisions of the Act, in no
uncertain terms. An investigation cannot be directed merely on
the grounds that proceedings before the CCI are time bound and
such proceedings are in the interest of a free and fair market
and economy. The averment of the CCI is contrary to the
scheme of the Act, which unambiguously mandates that an
investigation can only be directed by the CCI after the formation
of a prima facie opinion of contravention of the provisions of the
Act, based on due consideration of the factors laid down under
Section 19(3) of the Act. It has been further stated that by way
of such submissions that the CCI has attempted to circumvent
its statutory mandate set out under Section 26(1) of the Act.
3.21.13. Regarding the CCI is merely required to record
"some reasons", it has been contended that the CCI has sought
to defend the CCI Order by submitting that since it is required to
record only "some reasons" in an order under Section 26(1) of
the Act, the CCI Order is a valid order. However, such
submission is incorrect and is premised on a selective reading of
the judgment of the Hon'ble Supreme Court in CCI v. SAIL and
completely ignores para 97 of the judgment. The Hon'ble
Supreme Court in para 97 of the CCI v. SAIL judgment has
observed that "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, requiring issuance of direction for investigation to
the Director General". Therefore, though the CCI is required to
record "some" or "minimum" reasons in an order under Section
26(1) of the Act, it is not absolved from expressing its prima
facie opinion of contravention of the provisions of the Act in "no
uncertain terms" and therefore, as the CCI has failed to do so in
the CCI Order and on this ground alone, the CCI Order should be
set aside.
3.21.14. In support of his contention, the learned Senior
counsel for the appellant has placed reliance upon the following
extracts from the judgment of the Hon'ble Supreme Court in CCI
v. SAIL, in respect of the orders passed in an administrative
proceeding.
"95. The Court examined various judgments of this Court in
relation to its application to administrative law and held as
under: (Shukla &Bros. case, [(2010) 4 SCC 785] pp. 791-92,
paras 11 &13-14)
"11. The Supreme Court in S.N. Mukherjee v. Union of lndia,
[(1990) 4 SCC 594] while referring to the practice adopted and
insistence placed by the courts in United States, emphasised the
importance of recording of reasons for decisions by the
administrative authorities and tribunals. It said 'administrative
process will best be vindicated by clarity in its exercise'.
To enable the courts to exercise the power of review in
consonance with settled principles, the authorities are advised of
the considerations underlying the action under review. This
Court with approval stated: (SCC p. 602, para 11)
'11 . ... "the orderly functioning of the process of review
requires that the grounds upon which the administrative
agency acted be clearly disclosedand adequately sustained".'
...
13. At the cost of repetition, we may notice, that this Court has
consistently taken the view that recording of reasons is an
essential feature of dispensation of justice. A litigant who
approaches the court with any grievance in accordance with law
is entitled to know the reasons for grant or rejection of his
prayer. Reasons are the soul of orders. Non-recording of
reasons could lead to dual infirmities; Firstly, it may
cause prejudice to the affected party and secondly, more
particularly, hamper the proper administration of justice.
These principles are not only applicable to administrative
or executive actions, but they apply with equal force and,
in fact, with a greater degree of precision to judicial
pronouncements. A judgment without reasons causes
prejudice to the person against whom it is pronounced, as that
litigant is unable to know the ground which weighed with the
court in rejecting his claim and also causes impediments in his
taking adequate and appropriate grounds before the higher
court in the event of challenge to that judgment ... .
14. The principle of natural justice has twin ingredients; firstly,
the person who is likely to be adversely affected by the action of
the authorities should be given notice to show cause thereof and
granted an opportunity of hearing and secondly, the orders so
passed by the authorities should give reason for arriving at any
conclusion showing proper application of mind. Violation of
either of them could in the given facts and circumstances of the
case, vitiate the order itself. Such rule being applicable to the
administrative authorities certainly requires that the judgment
of the court should meet with this requirement with higher
degree of satisfaction. The order of an administrative
authority may not provide reasons like a judgment but
the order must be supported by the reasons of
rationality. The distinction between passing of an order
by an administrative or quasi-judicial authority has
practically extinguished and both are required to pass
reasoned orders."
It has been stated that in this very judgment, the Hon'ble
Supreme Court while referring to other decisions held that it is
essential that administrative authorities and Tribunals
should accord fair and proper hearing to the affected persons
and record explicit reasons in support of the order made by
them.
Reliance has also been placed upon paragraphs 96 and 97
of the aforesaid judgment and the same reads as under;
96. Even in cases of supersession, it was held in Gurdial Singh
Fijji v. State of Punjab, (1979) 2 SCC 368 that reasons for
supersession should be essentially provided in the order of the
authority. Reasons are the links between the materials on
which certain conclusions are based and the actual
conclusions. By practice adopted in all courts and by
virtue of judge-made law, the concept of reasoned
judgment has become an indispensable part of basic rule
of law and in fact, is a mandatory requirement of the
procedural law. Clarity of thoughts leads to clarity of vision
and therefore, proper reasoning is foundation of a just and fair
decision. Reference can be made to Alexander Machinery
(Dudley) Ltd. v. Crabtree[1974 ICR 120] in this regard.
97. The above reasoning and the principles
enunciated, which are consistent with the settled
cannons of law, we would adopt even in this case..."
3.21.15. It has been contended that though the CCI in
an order under Section 26(1) is required to give "some" /
"minimum" reasons, it must at the very least (a) disclose the
grounds upon which the CCI formed a view of contravention of
the provisions of the Act and (b) demonstrate a clear link
between the materials before the CCI and the opinion formed by
the CCI. The CCI Order fails to satisfy either of the aforesaid two
tests.
3.21.16. Regarding the CCI has deliberately passed
such an order, as a detailed order may influence the DG during
its investigation against the appellants, it has been contended by
the learned Senior counsel for the appellant that as a matter of
practice, whenever the CCI passes an order directing the DG to
investigate a matter under Section 26(1) of the Act, it states
that "nothing stated in this order shall tantamount to a final
expression of opinion on the merits of the case and the DG shall
conduct the investigation without being swayed in any manner
whatsoever by the observations made herein." (Para 29 of the
CCI Order). The stand that the Director General may be swayed
by reasons provided by the CCI is quite unacceptable given the
statutory mandate that the CCI must express a prima facie
opinion of contravention of the provisions of the Act. It has been
further contended that in the event the submissions above made
by the CCI are accepted, the same would result in following
serious consequences:
a. The CCI's role in Section 26(1) of the Act will be reduced to
a mere post office, as it will be simply forwarding
allinformation(s) received to the DG for investigation and
will not be required to apply its mind to the information(s)
and forward only those information(s) to the DG that merits
investigation.
b. Given that there is no right of hearing at the Section 26(1)
stage, the only protection available to anopposite party
against arbitrary exercise of power by the CCI, i.e.,
disclosure of mind in no uncertain terms with reference to
material on record, will be taken away (pertinently, there is
no other protection available to an opposite party in the
form of opportunity of hearing, reasoned order etc.).
c. An opposite party will be subjected to a very intrusive
investigation without there being any checks and balances.
3.22. In respect of the issue that the CCI Order failed to
satisfy the existence of jurisdictional facts of contravention of the
provisions of the Act, it has been contended by the appellant that
the impugned order fails to consider that the CCI Order does not
demonstrate the formation of a prima facie opinion on the
contravention of the provisions of the Act, which by necessary
implications would have involved the formation of a view on:
a. the existence of an 'agreement' in contravention of the
provisions of the Act;
b. the agreement being between enterprises at different stages
of a production chain; and,
c. an appreciable adverse effect on competition ("AAEC")being
caused or likely to be caused by this agreement, having
regard to the factors enumerated under Section 19 (3) of the
Act.
3.23. In respect of the issue that the CCI Order seeks to
direct an investigation against the appellant for the alleged
contravention of the provisions of Section 3(4) of the Act, the
appellant has submitted that each of the three elements
mentioned above paragraphs are jurisdictional facts and
necessary pre-requisites for establishing a prima facie case of
contravention under the provisions of the Section 3(4) of the
Act. Without the existence or establishment of such jurisdictional
facts, the CCI did not have the jurisdiction to pass the CCI Order
under Section 26 (1) of the Act. The learned Single Judge
despite recognizing that one of the aspects of judicial review is
to examine the "decision making process", has failed to
appreciate that the CCI Order completely fails to address these
three essential jurisdictional facts. Accordingly, the CCI Order is
bad in law and liable to be set aside.
3.24. In respect of the issue relating to existence of an
agreement in contravention of the provisions of the Act, it has
been contended that the Informant had not placed any
"agreement" before the CCI that demonstrated the allegations of
deep discounting, exclusive tie-ups, preferred sellers and/or
preferential listing. Pertinently, even the CCI in the CCI Order
fails to record any conclusion that there exists an agreement in
contravention of the provisions of the Act to which the appellant
is a party to. The only agreement identified by the informant in
the Information was between Amazon and its sellers. It has
been stated that it has been the categorical stand of the
appellant before the learned Single Judge that the CCI Order,
failed to form an opinion (even a prima facie one) as to the
existence of an agreement to which the appellant was a party.
3.25. It has been stated that the appellant has in its writ
petition before the learned Single Judge clearly pleaded that :
"11. FOR THAT the Impugned Order fails to record any finding
that there is an agreement, let along an agreement in
contravention of the provisions of the Competition Act. The
Impugned Order only records that the Information's allegations
relating to four supposed "practices" namely, (a) exclusive
launch of mobile phones; (b) preferred sellers on the
marketplace (c) deep discounting ; and (d) preferential listing or
promotion of private labels. Further the Impugned Order does
not identify in clear terms the parties to these unilateral
practices and how the same would fall with[in] the ambit of
Section 3(4) of the Competition Act.
12. Instead of identifying such alleged ant-competitive
agreements the Impugned Order refers to the ... alleged
unilateral practices of the Petitioner. .... It is respectfully
submitted that mere unilateral practices of an enterprise do not
amount to an "agreement" for the purpose of Section 3 of the
Competition Act. An agreement by its very definition under the
Competition Act, requires the concurrence of wills, i.e, it is a
bilateral action having the concurrence of two or more parties.
Furthermore, it much be noted that the only agreement that the
Information identified was the Amazon Seller Agreement. No
Agreement of any nature was identified by the Informant with
respect to the Petitioner. ..."
(Vol. II, p. 124 at 148,149)
The CCI had in its Objection to the writ petition not denied
the pleadings made by the appellant and therefore, the orders
passed by the CCI and the learned Single Judge deserves to be
set aside.
3.26. It has been contended that the Hon'ble Bombay High
Court (Division Bench)in Star India v CCI, 2019 SCC Online
Bom 3038 (the Star Case), a decision that is binding on the
CCI, held that while considering a contravention of Section 3(4)
of the Act, the CCI ought to render a prima facie finding as to
the existence of an agreement. The Bombay High Court in the
said decision has held as under:-
"83. In the Impugned Order, in order to hold a prima
facie contravention of Section 3(4), CCI ought to have formed
a prima facie view that there exists an agreement either
between Star/Sony and NSTPL which provides for a refusal to
produce, supply, distribute, store or trade in goods or
provision of services with/to NSTPL and that such agreement
causes AAEC."
3.27. In respect of the issue regarding different Stages of
a Production Chain, it has been contended that the CCI has
failed to examine the question of whether the appellant, i.e., an
online marketplace platform and the sellers/manufacturers (with
whom the appellant is alleged to have entered into anti-
competitive agreements with) are situated at different levels of a
"production chain", as required for a violation of Section 3(4)
read with 3(1) of the Act. It has been further contended that for
the CCI to direct an investigation into a violation of Section 3(4)
of the Act, the agreement which is alleged to have contravened
the Act must be between enterprises at different stages or levels
of a "production chain". It is submitted that the appellant being
an online marketplace platform is not a part of the production
chain of any product, as it admittedly merely provides
intermediary services to sellers of products.
3.28. It has been further contended that the production
chain starts from the manufacturer and ends with the sellers of
products. Indeed, there are different production chains for each
product that is being sold on the online marketplace platform,
however, the online marketplace platform does not become a
part of the production chain merely because it provides certain
services to the sellers of products on its platform. As such, an
online marketplace platform by providing intermediary services
such as storage and warehousing, does not become part of the
production chain for the purpose of Section 3(4) of the Act.
These are adjunct services which are outside the purview of a
production chain. It has been stated that the appellant is an
online commerce marketplace platform on which various sellers
sell different products which are purchased by customers. The
platform neither buys the goods nor sells them. It only facilitates
the sale and purchase of products by providing intermediary
services. The online marketplace provides a platform to the
sellers for sale of products but does not add any value to the
products being sold. Unlike a seller, the online marketplace
platform does not take title to goods but provides intermediary
services for the sale of such products on its platform.
3.29. It has been further contended that the appellant
stands on the same footing as an entity which owns and
operates a shopping mall. Similar to an entity which owns and
operates a shopping mall, the appellant only provides a platform
for the different sellers to sell their products to consumers that
visit the shopping mall. Merely providing the platform, i.e., space
in the shopping mall, does not make the appellant a part of the
production chain of the products sold in the shopping mall. The
owner of a shopping mall also provides several services such as
parking, security, maintenance etc., however, the provision of
such services does not make the owner of a shopping mall a part
of the production chain of the products sold in the shopping mall.
3.30. It has been further contended that the CCI has
sought to argue that a physical mall is completely distinct from
the marketplace of the appellant as in the CCI's view an e-
commerce marketplace is more closely involved in supply and
distribution and is a stakeholder in the said process by earning
commissions. This averment of the CCI fails to recognise that
physical malls are in the nature of business enterprises that are
more involved in commercial activities in their premises, and not
mere landlords. This is for the following reasons:
a. Malls can have rent based on sales revenues;
b. Malls organise events to attract footfall;
c. Malls organise festivalswhere discounts are offered by
shops (across the mall);
d. Malls offer various services like parking, valet services,
security and maintenance services;
e. Malls advertise and provide space for brands to advertise
inside as well as outside the mall; and
f. Malls provides home delivery and ancillary logistics
services.
It is stated that therefore, it is completely incorrect to
suggest that a physical mall is completely distinct from an e-
commerce marketplace
3.31. It has been further contended that it is pertinent to
note that there are tens of thousands of products which are sold
on the marketplace platform of the appellant. It would be
absurd to conclude that the appellant becomes a part of
production chain for all the products sold on its platform. It has
been further contended that the phrase "different stages or
levels of production chain" which are found in Section 3(4) of the
Act are words of limitation, and the section cannot be read by
ignoring those words. It has been stated that if the words are
not given their due importance, it would render the words
redundant, which would be against all cannons of statutory
interpretation. Therefore, as the appellant is not part of the
production chain of the products sold on its online marketplace
platform, any agreement entered into by the appellant to
provide services to sellers on its platform cannot be held to be
an agreement between enterprises operating at different levels
of the production chain. Accordingly, such an agreement could
not have formed the basis for the CCI's direction to investigate
violation of Section 3(4) read with Section 3(1) of the Act.
Hence, the orders passed by the CCI and the learned Single
Judge deserves to be set aside.
3.32. It has been contended that during the oral
submissions before the learned Single Judge, the CCI had
submitted that the words "production chain" as used in Section
3(4) of the Act would derive its colour from the latter part of
Section 3(4) of the Act, i.e., "supply, distribution, storage, sale
or trade". It is stated that such a submission is completely
erroneous and contrary to the principles of statutory
interpretation. The same completely ignores the language used
in Section 3(4) of the Act. The provision expressly refers to
"enterprises or persons at different stages or levels of production
chain in different markets" and thereafter specifically states that
the "agreement ... in respect of production, supply, distribution,
storage, sale or price of, or trade in goods or provision of
services". Therefore, whilst "production chain" refers to entities,
"supply, distribution, storage, sale or trade" refers to the content
of the agreements. Evidently, these two are different aspects
and the CCI's submission seeks to erroneously ignore the former
criteria, i.e., there must be an agreement between enterprises at
different stages or levels of the 'production chain'.
3.33. It has been contended that the words occurring in
the latter half of the Section 3(4) would colour the phrase
"production chain" is plainly wrong for two reasons:
(i) A reading of Section 3 (4) makes it clear that it focuses upon
the nature of the entities and their relationship, and not the
subject matter of the agreement. The agreement has to be
between persons at different stages or levels of "the
production chain". If this precondition is not satisfied, the
section is not attracted. The subject matter of the agreement
is described in language of width: it can be an agreement for
production commerce supply, storage, distribution etc. and
may relate to sale price of goods, and may also relate to any
one of the elements in the non-exclusive list set out in the
provision. The CCI's reading of the provision confuses
between the primary requirement of the relationship
between the parties (different stages of the production
chain) and the content of the agreement (distribution, sale,
storage etc.)
(ii) The words "different stages or levels of the production chain"
are the defining feature of the provision and are the words of
limitation. The submission on behalf of the CCI would in
effect be an invitation to ignore the words of limitation and
broaden the scope Section 3 (4) of the Act beyond the
language used therein.
3.34. It has been contended that the Parliament has
carefully crafted the provision by inserting two requirements that
have to be fulfilled in order to enable the CCI to exercise its
power. The first is that the agreement should be at different
stages or levels of the production chain, and the second should
be that the agreement causes or is likely to cause AAEC. The
submission of the CCI invites this Hon'ble Court to empower the
regulator to order an investigation into all agreements in respect
of production supply storage and distribution of goods without
examining either fulfilment of the limitation (different stages or
levels of the production chain) or the prima facie existence of
facts and circumstances that show an appreciable adverse effect
on competition. It has been further contended that the CCI has
sought to argue that "production chain" must be read as supply
chain. Whilst making the above submission during the oral
submissions before this Hon'ble Court, CCI had referred to the
judgment of the Hon'ble Supreme Court in Excel Crop Care Ltd
v. CCI, (2017) 8 SCC 47. It is important to note that the Excel
Crop Care decision was a decision regarding collusive bidding (a
horizontal agreement in violation of Section 3(3) of the Act,
where an appreciable adverse effect on competition ("AAEC") is
presumed and as opposed to Section 3(4) of the Act, AAEC need
not be established at the prima facie stage. Further. the
reference made in paragraph 21 of this judgment to the "supply
side" is wholly unrelated to vertical agreements that are in
question here, and was instead a discussion regarding how
competition law seeks to regulate enterprises selling goods to
consumers, for the benefit of said consumers. This does not, in
any manner, take away from the statutory requirement under
Section 3(4) of the Act to establish an agreement between
persons at different levels of the 'production chain'.
3.35. It has been contended that in response to the
submission of the appellant that Section 3(4) of the Act is not
applicable to the facts of the present case, it has been submitted
by the CCI that it can proceed against the appellant under
Section 3(1) of the Act which as per the CCI is wider in scope.
In this regard, it has been stated that the scope of the present
proceedings before this Hon'ble Court is to examine if the CCI
Order meets the jurisdictional threshold for initiating an inquiry
under Section 3(4) of the Act. In the event that the appellant is
able to demonstrate that the CCI Order does not satisfy such
jurisdictional thresholds, CCI cannot be permitted to justify the
Order by relying on other provisions of the Act, which do not
form the basis for passing the CCI Order. In Arguendo, and on a
without prejudice basis, the CCI order fails to meet the
jurisdictional threshold under Section 3(1) of the Act as well. It
is further stated that Section 3(1) also requires an agreement to
be identified and an AAEC to be found. Even if an investigation is
to be directed under Section 3(1) of the Act, the CCI is required
to consider the factors laid down under Section 19(3) of the Act
and prima facie establish that the agreement in question causes
or is likely to cause an AAEC India. It has been further stated
that reliance on Section 3(1) of the Act by the CCI does not
absolve it from its statutory duty to analyse the factors set out
under Section 19(3) of the Act for a prima facie finding of AAEC
in India. It is further stated that the CCI Order fails to examine
AAEC.
3.36. In respect of the issue regarding appreciable Adverse
Effect on Competition, it has been contended by the learned
counsel for the appellant that the CCI Order ought to have
carried out a prima facie analysis of the factors under Section
19(3) of the Act to show how the alleged agreement causes or is
likely to cause an AAEC. In the absence of such an analysis of
Section 19(3) factors, the CCI could not have come to a
conclusion of contravention of the provisions of Section 3(4) of
the Act, as an agreement is in contravention of the provisions of
Section 3(4) of the Act only if such an agreement causes an
AAEC. The same is evident from a bare perusal of Section 3(4)
of the Act which specifically stipulates that the agreement shall
be in contravention of the section "if such agreement causes or
is likely to cause an appreciable adverse effect on competition in
India". As such an agreement may be considered to in
contravention of the provisions of Section 3(4) of the Act only if
such an agreement causes or is likely to cause an appreciable
adverse effect on competition in India.
3.37. It has been contended that factors to be considered
by the CCI to examine if an agreement causes AAEC or not, have
been provided for in Section 19(3) of the Act. Pertinently,
Section 19(3) (a) to (c) sets out adverse impact of an agreement
on competition and Section 19(3) (d) to (f) sets out positive
impact of an agreement on competition. Therefore, the CCI in
order to arrive at a finding on AAEC is required to consider both
adverse and positive impact of the agreement. The CCI cannot
ignore the legislative guidance provided in terms of Section
19(3) as to what constitutes AAEC. It has been further
contended that the CCI Order fails to undertake any analysis
(leave alone recording any prima facie opinion) if any alleged
agreement to which the appellant is party, "causes or is likely to
cause an appreciable adverse effect on competition in India".
Therefore, the CCI Order deserves to be set aside on this ground
alone.
3.38. It is contended that the Hon'ble Bombay High Court
in the Star Case, i.e., Star India v CCI, 2019 SCC Online Bom
3038, held that CCI must undertake an analysis under Section
19(3) of the Act at the stage of forming a prima facie opinion.
"80. Another aspect that leads us to hold that the Impugned
Order cannot be sustained is that the Petitioners as also CCI
were ad idem as to the onus cast upon CCI under Section 26(1)
of the Act. This meant that a prima facie finding AAEC
would be an essential and mandatory finding before CCI
could direct investigation. However, the Impugned Order
lacks this necessary finding. In our considered opinion, the
Impugned Order cannot be sustained on this count alone..."
"82. Further, whilst considering a contravention of Section 3(4)
of the Act, CCI ought to render a prima facie finding as to the
existence of an agreement refusing to deal and that such
agreement causes/is likely to cause AAEC in India. However, as
already held by us hereinabove, such material finding is lacking
in the Impugned Order. ...Before directing an investigation,
the CCI ought to have applied its mind to and scrutinized
the Petitioners' conduct based on the factors set out
under Section 19(3) of the Competition Act..."
"84. The impropriety of the Impugned Order stands further
buttressed from the fact that whilst it says that the
Petitioners have prima facie violated Section 3(4) read
with 3(1) of the Competition Act, the factors to arrive at
such finding viz Section 19(3) have not been considered.
The Impugned Order is once again found lacking in the
requirement to analyse and apply the factors laid down under
Section 19(3) of the Competition Act and therefore cannot be
sustained."
3.39. It has been contended that a perusal of the above
makes it apparent that analysis of factors provided for in Section
19(3) of the Act is sine qua non for arriving at a finding of
contravention of the Section 3(4) of the Act. Additionally, such
an analysis needs to be undertaken even at the stage of
formation of an opinion under Section 26(1) of the Act. The
purpose of carrying out a prima facie analysis of AAEC based on
the Section 19(3) factors at the Section 26(1) stage is to ensure
that only those information(s) that merit investigation are
forwarded to the DG. In the counterfactual, if the prima facie
AAEC analysis is not required or necessary then every
information filed with the CCI would be directed for
investigation, which is not the intent of the legislature at the
Section 26(1) stage.
3.40. It has been contended that the decision of the
Bombay High Court in the Star Case though cited finds no
mention in the Impugned Order and has not been addressed by
the CCI at all during the oral arguments. The decision although
under appeal before the Hon'ble Supreme Court, has not been
stayed and therefore, binds the CCI. The CCI before the learned
Single Judge as well as before this Hon'ble Court (during oral
submissions) submitted that it was not required to analyse
factors mention in Section 19(3) at the stage of Section 26(1) of
the Act.
3.41. It has been stated that in this regard, the relevant
extract of the affidavit filed by the CCI before the learned Single
Judge reads as under:
"33. On the issue of assessment of AAEC at the time passing an
order under Section 26(1), it is respectfully submitted that there
is no necessity of such a 'prima facie' finding at that
stage.
...
35. It is respectfully submitted that the very nature of factors
enumerated above require detailed analysis not only of the facts
surrounding the impugned conduct but also aspects of economics
and law. Therefore, it would be contrary to the legislative
scheme and the very nature of an order passed under
Section 26(1) of the Act, if the requirement of prima facie
determination of AAEC is read into it. Moreover, the
Petitioner is wrong in suggesting that the rule of reason in
determining AAEC is required to be applied in totality at the prima
facie stage, when no investigation into the alleged
actions/conduct has yet been carried out by the Respondent
Commission. As stated above, the exercise of assessing AAEC
requires going into facts and evidence both in relation to the
conduct and its effect on the market especially in light of the
factors enshrined under Section 19(3) of the Act and is not a
perfunctory exercise, as it entails serious consequences on the
marker and its constituents. The Answering Respondent at the
stage of Section 26(1) of the Act, in terms of settled
jurisprudence, particularly CCI v. SAIL (supra), is not required to
conduct a full-fledged enquiry, particularly when it is handicapped
in the absence of detailed findings of investigation at that stage."
3.42. It has been contended by the learned counsel for the
appellant that it was submitted by the appellant before the
learned Single Judge that by virtue of Regulation 18(2) of the
CCI (General) Regulations, 2009, as the inquiry commences only
post an order under Section 26(1) of the Act, the CCI is not
bound to consider provisions of Section 19(3) of the Act at the
stage of passing an order under Section 26(1) of the Act. It has
been submitted that the submissions made by the CCI before
this Hon'ble Court and before the learned Single Judge (as
extracted hereinabove) are devoid of any merits for the following
reasons:
(a) Such submission is contrary to the judgment of the
Hon'ble Bombay High Court in the Star Case (Para 80-84, as
extracted hereinabove) wherein the Hon'ble Bombay High Court
has held - (i) that for a finding on contravention of the
provisions of the Section 3(4) of the Act, it is imperative that
there should be a finding on AAEC on the basis of provisions of
Section 19(3) of the Act, and, (ii) an analysis of the provisions of
Section 19(3) must be undertaken at the stage of Section 26 as
well.
(b) Such submission is contrary to the provisions of Section
3(4) of the Act itself, which provides that an agreement shall be
considered to be in contravention of the provisions of the Act "if
such agreement causes or is likely to cause an appreciable
adverse effect on competition in India". As such factors are
provided under Section 19(3) of the Act, at the stage of
formation of a prima facie opinion of contravention of Section
3(4) of the Act, CCI cannot be permitted to ignore the factors
contained in Section 19(3) of the Act;
(c) If the submission of the CCI is accepted then it will lead
to an absurd situation wherein the CCI will be required to apply
different tests for violation of provisions of Section 3(4) - at the
stage of Section 26(1) of the Act as opposed to other stages of
the proceedings before the CCI.
(d) Such a submission of the CCI does not have any statutory
support in as much there is no provision in the Act which
provides that the test for contravention of Section 3(4) of the Act
is different at the stage of Section 26(1) as against other stages
of proceedings before the CCI;
(e) If the submission of the CCI is accepted, it will result in
giving unbridled powers to the CCI, as the CCI will be permitted
to conclude that an agreement is or is not in violation of the
provisions of Section 3(4) of the Act without considering the
factors provided under Section 19(3) of the Act. It is submitted
that the factors as provided under Section 19(3) of the Act, are
guiding principles for the CCI to determine whether or not an
agreement causes AAEC. Such guiding principles must
necessarily be considered and analysed by the CCI, irrespective
of the stage of proceedings.
(f) The submission of the CCI is also contrary to provisions of
Section 19(1) of the Act. As per Section 19(1) of the Act, the
"inquiry" is undertaken by the CCI on receipt of Information.
Pertinently, at the stage of mere receipt of information, Section
26(1) order does not exist. Therefore, CCI is required to keep
into consideration factors enumerated under Section 19 of the
Act at every stage and not merely after passing an order under
Section 26(1) of the Act. The purpose of analysing the AAEC
factors at the prima facie stage is to ensure that only those cases
are referred to the DG that merit investigation.
(g) Without prejudice to the above, it is submitted that
submission made by the CCI is misleading and is contrary to the
provisions of Section 19(3) of the Act itself. It is submitted that
Section 19(3) does not even use the word "inquiry". Therefore,
even if the submission made by the CCI is accepted that the
"inquiry" commences only after issuance of an order Section
26(1) of the Act, even then the factors contained in Section
19(3) of the Act ought to have been considered at the stage of
Section 26(1) of the Act. This needs to be compared with Section
19(4) which uses the word "inquiring". The legislature has
deliberately used different words in these sections and this
should be given effect to. This makes it clear that the legislative
intent was that Section 19(3) would be considered at the prima
facie stage as well.
(h) Further, such an assertion is contrary to the CCI's own
practice in the cases set out below, where the CCI analysed the
factors provided under Section 19(3) of the Act at the prima
facie stage itself:
I. Mohit Manglani v. Flipkart India Pvt Ltd, 2015 SCC
Online CCI 61 (an order involving the Appellant);
II. Vishal Pande v Honda Motorcycle and Scooter Pvt
Ltd, 2018 SCC Online CCI 15;
III. M/s Karni Communication Pvt Ltd. & Anr. vs
Haicheng Vivo Mobile (India) Pvt Ltd. & Ors, 2019 SCC
Online CCI 11 (pr. 27-28).
3.43. It is stated that therefore, the CCI has committed a
fatal error on interpretation of the provisions of Section 19(3)
and Section 3(4) of the Act. This error goes to the root of the
matter. A bare perusal of the CCI Order demonstrates that the
CCI has not undertaken any analysis of existence of jurisdictional
facts for a contravention of the provisions of Section 3(4) of the
Act. Having failed to do so, the CCI Order lacks jurisdictional
facts and ought to be set aside by this Hon'ble Court exercising
its powers of judicial review.
3.44. It has been contended that the CCI has relied on
Para 23 and Para 26 as the only instances in the CCI Order
wherein it has examined AAEC. The relevant extracts of Para 23
and 26 are produced below:
"23 ... Thus, exclusive launch coupled with preferential
treatment to a few sellers and the discounting practices create an
ecosystem that may lead to an appreciable adverse effect on
competition."
"26. ... It needs to be investigated whether the alleged
exclusive arrangements, deep-discounting and preferential listing
by the Ops are being used as exclusionary tactic to foreclose
competition and are resulting in an appreciable adverse effect on
competiton contravening the provisions of Section 3(1) read with
Section 3(4) of the Act"
It has been stated that a perusal of the above extract
makes it evident that:
g. There is no analysis or finding of AAEC in both the above
paragraphs, reliance on which has been placed by the CCI.
In one instance, the CCI is speculating and in the other, the
CCI is merely stating that it needs to be investigated if there
is any AAEC;
h. The CCI has not examined the factors as provided under
Section 19(3) of the Act to determine whetherprima facie the
agreements cause or are likely to cause an AAEC in India.
Therefore, it is contended that reliance on Para 23 and 26 of
the CCI Order is misplaced.
3.45. It has been contended that the CCI is a creature of
the statute and cannot deviate from the mandate of the statute.
The Act allows the CCI to investigate only - dominant enterprises
for abuse of dominance (Section 4), and agreements if they
cause an AAEC (Section 3). The CCI cannot be permitted to
investigate anything beyond the express provisions of the Act. In
this case, the CCI has expressly recorded its conclusion that that
there is no case made out against the appellant of contravention
of Section 4. Having arrived at such conclusion, the CCI has
sought to investigate appellant under Section 3(4) read with
3(1) of the Act. As submitted above, whilst proceeding against
the appellant for an alleged violation of Section 3(4) of the Act,
the CCI has failed to examine and establish the existence of
jurisdictional facts in no uncertain terms, which were essential
for directing an investigation against the appellant under Section
3(4) of the Act.
3.46. It has been contended by the learned Senior counsel
for the appellant that the CCI's mandate is to enforce the Act,
not to investigate and examine things that the Act does not
cover. If there is no statutory backing for an examination, that
examination cannot be allowed. The CCI seems to be making an
attempt to exercise control over and regulate affairs over which
it has not been conferred jurisdiction under the grab of public
interest. The same is evident from the submissions of the CCI
before this Hon'ble Court wherein the CCI has sought to proceed
against the appellant merely on the basis of certain "serious
allegations", which as per the CCI warranted investigation,
without even examining the veracity of such information or if
prima facie there was any contravention of the provisions of the
Act.
3.47. It has been contended that the CCI seems to be
approaching this with a premeditated mind - it wants to
investigate appellant, and so is figuring out a way to shoe-horn
Flipkart's conduct into the Act. That is inappropriate for a
statutory regulator. It is stated that as can be seen from the
CCI Order, the CCI has ordered an investigation into conduct
that is only prohibited under Section 4 of the Act (i.e., only
prohibited when carried out by a dominant enterprise) while
explicitly finding that there is no case for dominance made out.
This is clearly a case of over-reach. In order to justify this, the
CCI has sought to aver that if the submissions of appellant is
accepted, the CCI would have no recourse under Act. This again
shows that the CCI seems to widen its power to investigate even
though there is no express provision enabling it to do so. The
same is not permissible under the Act.
3.48. It has been further stated that no case of
contravention of Section 3(4) of the Act has been made out. In
respect of issue of Preferred Sellers, it has been contended that
the CCI Order while directing an investigation appears to have
erred into coming to a conclusion that the appellant's online
marketplace platform has certain preferred sellers. It is stated
that there are no structural links (shareholding, control, common
directors, common offices) between the appellant and any seller
on its online marketplace platform. Therefore, the question of
preferred sellers does not arise.
3.49. It has been contended that as noted by the CCI in
the AIOVA v. Flipkart, 2018 SCC Online CCI 97 (an order
involving the appellant), the link between appellant and WS
Retail was severed as of 2012. In fact, WS Retail ceased to be a
seller on the appellant's online marketplace platform from April
2017. The CCI has in the said case recorded that:
"31.The Commission also observes that so far as the
issue of preferential treatment given by OP-1 to exclusive seller
(WS Retail Services Private Limited) which is stated to be owned
by OP-2, suffice to point out that the Informant itself has
admitted in the Information of such structural link between OP-2
and WS Retail existed only till 2012. Hence, no such concern
is present today. Additionally, Flipkart has pointed out that
WS Retail Services Pvt. Ltd. is no longer a seller on the
Flipkart Marketplace post 11 April 2017."
3.50. It has been contended that the CCI Order failed to
even refer to its earlier order in the AIOVA Case where it had
come to a categorical conclusion that there were no structural
links between the appellant and any of its sellers including in
particular WS Retail. As a regulator, it was mandatory for the
CCI, to follow the factual findings recorded by it in the AIOVA
Case in relation to the same entities. However, the CCI Order fails
to do so, let alone even refer to the AIOVA Order while directing
investigation against the appellant. It is stated that the appellant
had categorically submitted before the learned Single judge that
there were no structural links (by way of any shareholding, board
representation, or management rights, or commonality of
employees or offices) between the appellant and the sellers on
the its marketplace platform. Indeed, this structural link is
seminal, as it is on the reliance of this link, that the CCI accepts
the allegations against the appellant. It is on the basis of the
alleged structural links (which do not exist in case of the
appellant) that the CCI arrived at its prima finding of preferred
sellers/preferential treatment. Considering that the CCI in the
AIOVA Case already noted the absence of such structural links,
the CCI ought not to have directed the investigation against the
appellant for the same facts.
3.51. It has been contended that the allegation against the
appellant is that Omnitech, a seller on the appellant's online
marketplace platform, is owned by Consulting Rooms Pvt Ltd,
whose director Mr Ajay Sachdeva was also a director of WS
Retail in 2016. However, as the CCI had already noted that
there were no structural links between the appellant and WS
Retail after 2012, any link between Omnitech and WS Retail in
2016 is irrelevant and cannot be even prima facie considered to
constitute a link with the appellant, as the CCI has incorrectly
noted. It is stated that in its submissions, the CCI has sought to
assign various reasons to justify a complete deviation from its
AIOVA Order. It is submitted that none of the reasons now given
by the CCI merit any consideration by this Hon'ble Court, as no
such reasons were given in the CCI Order. Pertinently, as stated
above, the AIOVA Order does not even find a mention in the CCI
Order, leave alone any reasons for not following the same.
Additionally, one of the reasons given by the CCI for not
following AIOVA Order is that e-commerce market is an evolving
market. It is submitted that the CCI has failed to state facts in
support of these submissions. Additionally, the CCI has also
failed to provide factual details in its submissions before this
Hon'ble Court, justifying a complete deviation from AIOVA Order.
3.52. It has been contended that the notion of "preferred
sellers" is the cornerstone of the entire edifice on which the CCI
Order is based. The CCI alleges preferential treatment and listing
for preferred sellers, deep discounting to preferred sellers, and
exclusive launches through preferred sellers. Therefore, in the
absence of any evidence of preferred sellers for a prima facie
analysis under Section 26(1) of the Act, the CCI Order cannot be
sustained. In any event, allegations of preferential treatment, or
discrimination in favour of certain sellers, can only be examined
under Section 4 of the Act, and would only violate the Act, if the
enterprise in question was dominant, which the CCI has explicitly
rejected in this case.
3.53. In respect of the issue regarding deep discounting it
has been contended that the CCI Order directing an investigation
appears to have accepted the allegation of the Informant that
the appellant indulges in deep discounting. However, the CCI
Order fails to appreciate that discounts are legal under the Act,
and "deep" is merely an adjective. In fact, there is no statutory
meaning to the term "deep discounting". It has been further
contended that low prices are good, and are in fact a goal of
competition law - low prices means efficiencies are being
generated and passed on to customers. Without prejudice,
discounts can be claimed to be of some issue when (a) they lead
to prices below cost, (b) they are provided by a dominant
enterprise, and (c) they are provided with a view to eliminate
competition. The CCI order contains no findings on these three
aspects. It is stated that the investigating discounts that do not
meet the standard of predatory pricing in Section 4 of the Act
(which has the elements set out in the paragraph above. above)
is a classic case of over-reach by the CCI. It is submitted that
even this alleged practice would not reach to the level of an
agreement. A unilateral conduct by the parties can be examined
only under Section 4 of the Act and not under Section 3(4) of the
Act.
3.54. It has been further contended that to support the
allegation of deep discounting, the CCI has relied on the ITAT
Order to submit that the appellant seems to deploy a business
strategy of incurring loss in the short run by way of 'predatory
pricing', to reap benefits and capture the market in the long
term. Such reliance on observations in the ITAT Order in the
present proceedings is misplaced and untenable in light of the
reasons given below:
a. The assessee before the ITAT, was not the appellant. The
assessee in respect of which the observations were made by
the assessing officer was Flipkart India Private Limited, who
is not even party to the present proceedings. Therefore, the
ITAT Order cannot be seen as evidence of the appellant's
business model.
b. In any case, the observations relied upon are observations
of an assessing officer, whose decision was eventually
overturned by the ITAT.
c. Moreover, the reliance on the ITAT order by the NCLAT in
the AIOVA Case has been stayed by theHon'ble Supreme
Court.
d. Even if true, and applicable to the appellant, the allegations
in the ITAT order go to discounting, which is not prohibited
under Section 3(4) of the Act.
3.55. In respect of the issue regarding preferential listing,
it has been contended that the appellant influences search
results in favour of certain preferred sellers who are listed at the
top of the page and the non-preferred sellers are pushed out.
In this regard, it is stated that it is crucially important to note
that there are no "preferred sellers" since the appellant has no
structural links (by way of any shareholding, board
representation, common employees or offices) with any seller on
its marketplace platform. As such, the question of preferential
treatment or preferred sellers does not arise. It has been
further contended that the product listings which feature on the
top of the page are chosen through an algorithm based on
objective parameters (such as customer intent, customer
behaviour, customer needs including "product quality" and
"speed of delivery").
3.56. It has been contended that the CCI has
mischaracterised "Flipkart Assured" as seeking to favour certain
sellers in the search rankings. "Flipkart Assured" is an inclusive
customer-centric guarantee from the appellant focused on two
deliverables: quality and speed. Flipkart Assured products are
verified, packed with care and dispatched safely. It is not
selective and is determined by an algorithm on stringent
objective parameters. There are over 20,477 sellers who have a
product listed as "Flipkart Assured" and the appellant does not
have any common shareholding, common director, common
employee or common office with any such seller. In any event,
allegations of preferential treatment, or discrimination in favour
of certain sellers, can only be examined under Section 4 of the
Act, and would only violate the Act if the enterprise in question
was dominant, which the CCI has explicitly rejected in this case.
3.57. In respect of the issue regarding exclusive
arrangements it has been contended that the CCI failed to
appreciate that the smartphones which were alleged to be
exclusively available on the appellant's marketplace, continued
to be available on the manufacturers own website as well. That
being the case there can be no question of any exclusivity. It is
sated that it is ultimately the prerogative of the manufacturer of
smartphones to decide which platform or mode it chooses to sell
its products. An allegation of exclusivity, ought to therefore lie
against the manufacturer and not against the platform, which is
only an intermediary.
3.58. In respect of the issue regarding the informant
abused judicial process by indulging in forum shopping it has
been contended that the learned Single Judge failed to
appreciate that the Information filed before the CCI was a gross
abuse of judicial process, as the Informant has indulged in forum
shopping and approached the CCI with unclean hands. It is a
settled proposition of law that any party who approaches the
court with unclean hands is neither entitled to be heard on the
merits of the case nor is the party entitled to any relief. As the
Informant is simply a front of CAIT, this is a relevant factor to
weigh the credibility of the allegations and the material placed
by such Informant. To establish a nexus of the informant with
CAIT, the following reasoning was provided by the appellant:-
a. the Informant is a member of CAIT, an important fact
that the Informant neglected to mention before the CCI,
but admitted before the learned Single Judge;
b. the Informant's President and authorized signatory
serves as the Delhi Secretary General of CAIT; and
c. the demand draft submitted by the Informant towards
'filing fees' for filing the Information with the CCI has
been furnished by CAIT. (Vol. IV. P. 471).
3.59. It has been contended that in light of the aforesaid,
it was imperative for the Informant to disclose that CAIT has
pursued vexatious litigation against the appellant by approaching
several judicial for a, directly and through its sister entities,
raising exactly the same baseless allegations against the
appellant.
3.60. Learned Senior counsel for the appellant in support
of his submission relied upon the judgment in K.D. Sharma v.
SAIL, (2008)12 SCC 481, wherein the Hon'ble Supreme Court
held that:
"... Suppression or concealment of material facts is not an
advocacy. It is a jugglery, manipulation, maneuvering or
misrepresentation, which has no place in equitable and
prerogative jurisdiction. If the applicant does not disclose all the
material facts fairly and truly but states them in a distorted
manner and misleads the Court, the Court has inherent power in
order to protect itself and to prevent an abuse of its process to
discharge the rule nisi and refuse to proceed further with the
examination of the case on merits. If the Court does not reject
the petition on that ground, the Court would be failing in its duty.
In fact, such an applicant requires to be dealt with for contempt
of Court for abusing the process of the Court."(Vol. I, Para 64,
Page 65).
3.61. In respect of the issue regarding the appellant ought
to have been treated differently from Amazon, it has been
contended that there are a number of observations in the
Impugned Order and the CCI Order which confuse the facts
between Amazon's case and the appellant's case and this itself is
a ground which vitiates the CCI Order. The Informants had
alleged the violation of Section 4 of the Act by the combination of
Amazon and the appellant - a concept which was rejected by the
CCI itself. Having done so, the CCI should have independently
examine the case against each of the two platforms on the facts
relevant to those platforms. The failure to do so, and the
consequences of which are apparent from a reading of the CCI
Order, vitiates the CCI Order. The CCI failed to notice that some
of the facts which were present in the case of one were not
present in the case of the other and this would have result in the
CCI taking into account irrelevant considerations, which in turn
vitiates the CCI Order.
3.62. It has been further contended that both the CCI
Order as well as the Impugned Order erred in treating the
appellant on the same footing as Amazon (the other online
marketplace being investigated). For the CCI to direct an
investigation against the appellant, it ought to have come to a
prima facie opinion that the appellant (alone and irrespective of
the allegations against Amazon) had contravened the provisions
of the Act. It is submitted that the allegations and the evidence
before the CCI against the appellant were qualitatively different
from those relating to Amazon. In fact, Flipkart and Amazon are
fierce competitors, a fact which seems to have been lost sight of
by the CCI as well as the learned Single Judge. This is all the
more essential since the CCI Order, at paragraph 15, has
specifically noted that there could have been no violation of
Section 4 of the Act ('Abuse of Dominant Position") by the two
marketplace platforms, as the Act "does not provide for inquiry
into or investigation into the case of joint/collective
dominance......". Having rejected the allegation of joint
dominance against the appellant and Amazon, the only logical
step for the CCI was to consider the allegations individually
(based on separate factual matrix of the appellant and Amazon)
and come to specific prima facie opinions separately with
respect to the appellant on the one hand and Amazon on the
other. The learned Single Judge erred in failing to appreciate the
lack of such consideration in the CCI Order. This is more so, in
view of the peculiar factual differences of the two entities which
came to be also highlighted during the course of the hearing
before the learned Single Judge.
3.63. It has been contended that Amazon itself
differentiates itself from the appellant at paragraph 32 of its Writ
Appeal by submitting that the CCI has directed an investigation
in relation to an alleged violation of Section 3(4) of the
Competition Act against the appellant while primarily relying on
evidence allegedly relating to the Appellant. On a without
prejudice and demurer basis, despite this, the counsel for CCI,
during the course of the arguments before this Hon'ble Court
attempted to paint both the online marketplace platform entities
with the same brush, which is contrary to the scheme of the Act.
3.64. It has been contended that the contention of Amazon
that evidence against the appellant is being used against
Amazon is not only misleading but also plainly incorrect. It is an
admitted position that the only Agreement on record is the
Agreement to which Amazon is a party. Amazon does not
dispute this. There is no Agreement on record, and none has
even been alleged to even be in place in so far as the appellant
is concerned. As such, contrary to the submissions of Amazon, it
is the evidence and allegations against Amazon which are sought
to be attributed against Flipkart. Moreover, it is submitted that
unlike in the case of Amazon there are no structural links of any
kind between the appellant and its sellers who operate on the
marketplace platform. The CCI is aware of this in view of its
categorical findings in the AIOVA Case.
3.65. In light of the aforesaid, it has been contended that
the CCI Order was passed without having regard to the
mandatory prerequisites under Section 26 (1) of the Act and is
therefore liable to be set aside. The Impugned Order passed by
the learned Single Judge erred in not exercising the power of
judicial review which has been vested in it and therefore, prays
to allow the present appeal and set aside the CCI Order.
4. Learned Additional Solicitor General appearing for
respondent No.1/CCI has contended before this Court that the
order passed by the learned Single Judge dated 11.6.2021
warrants no interference at all, by which the order passed by
the CCI under Section 26(1) directing an investigation has been
upheld rightly by the learned Single Judge. It has been
contended that the order passed by the CCI under Section 26(1)
meets the parameter laid down by the Hon'ble Supreme Court in
its authoritative judgment in CCI v. SAIL. It has been further
contended that the scope of interference in a writ petition
against an order under Section 26(1) of the Act of 2002 is
extremely narrow. It is not a case where mala fides are alleged
against the Regulator, nor is there any jurisdictional infirmity
made out in the peculiar facts and circumstances of the case. It
is further contended that the order of the CCI meets with the
parameters of Wednesbury reasonableness as held by the
learned Single Judge and there is no ground for interference. In
fact, it is a sheer abuse of process and the appellant is
deliberately delaying the investigation which is imperative in the
public interest.
4.1. It has been contended by the learned Additional
Solicitor General that the scope of interference in respect of an
order under Section 26(1) of the Act of 2002 is quite limited, as
held by the Hon'ble Supreme Court in the case of CCI v. SAIL,
which is an order under Section 26(1) and this order can neither
be in adjudication nor determinative, but merely an inquisitorial,
departmental proceedings in the nature of a direction to the
Director General to make an investigation. It is neither a judicial
nor a quasi-judicial proceedings [CCI v. SAIL, paragraph 31(2)].
It has been further contended that the order under Section 26(1)
is administrative in nature and it is passed at a
preliminary/preparatory stage (CCI v. SAIL, paragraphs 38 and
39). She has further contended that under Section 26, the
enquiry only commences after Section 26(1) order is issued and
therefore, the order passed under Section 26(1) is an order
passed at a pre-enquiry stage. She has further contended that
what constitutes a prima facie case at the stage of 26(1) must
be gleaned not from the stand point of adjudication, but from
the stand point "setting the process into motion". (CCI v. SAIL,
paragraph 33).
4.2. The learned Additional Solicitor General has
further contended that the degree of satisfaction is far higher
under Section 33 of the Act of 2002 under which the CCI may
pass an injunction during the enquiry as compared to Section
26(1) order. It is an order passed at pre-enquiry stage and not
during the enquiry. The power under Section 33 of the Act of
2002 to pass a temporary restraint order, can only be exercised
by the CCI when it has formed a prima facie opinion and directed
investigation in terms of Section 26(1) of the Act of 2002.
Therefore, the formation of satisfaction while passing an order
under Section 33 of the Act of 2002 has to be much higher
degree than formation of prima facie view under Section 26(1) of
the Act of 2002. (CCI v. SAIL, paragraph 31). She has further
contended that no notice or hearing is necessary at this
preliminary stage while passing an order under Section 26(1) of
the Act of 2002 as held by the Hon'ble Supreme Court in the
case of CCI v. SAIL.
4.3. The learned Additional Solicitor General has
further contended that the order under Section 26(1) of the Act
of 2002 must record "minimal reasons" or at least "some
reasons" and elaborate reasons are not required as the CCI is
required to express only a "tentative view". She has also stated
that no civil consequences arise from an order passed under
Section 26(1) of the Act of 2002 as held by the Hon'ble Supreme
Court in the case of CCI v. SAIL (paragraph 38). The learned
Additional Solicitor General has further contended that the
proceedings under Section 26 are time bound and undue time
should not be taken in the interest of a free and fair market and
economy. Her contention is that the proceedings are time bound
only with an object that the market forces can move swiftly and
therefore, if anti-practices are not curtailed in time, the damage
to the economy can be irreparable. She has further contended
that the order passed under Section 26(1) of the Act of 2002 is
not an appealable order in contradistinction with the order
passed under Section 26(2), 26(6) and 27 of the Act of 2002,
which constitutes the determination as held by the Hon'ble
Supreme Court in the case of CCI v. SAIL.
4.4. Learned Additional Solicitor General for the CCI
has argued before this Court that the appellant/Flipkart has
committed a fundamental mistake by treating the order passed
under Section 26(1) as an adjudicatory order followed by an
adjudicatory process. The learned counsel has argued that
Section 26(1) does not set into motion an unstoppable process
that necessarily culminates into an adjudication against the
entity against whom an enquiry is initiated. On the contrary, if
Section 26 is read as a whole, it discloses a comprehensively and
thoughtfully construed, stepwise scheme which contemplates not
only a fair hearing to the concerned parties at the appropriate
stage, but it is characterized by an inherent robustness by which
the proceedings may culminate in closure. It has been further
argued that the DG may at a later stage can very well order
closure by his investigation report and the same can be accepted
by the CCI after hearing the concerned parties. It has been
further stated that even if the DG finds a contravention, the CCI
is nonetheless precluded from rejecting those conclusions after
hearing parties and applying its mind to the DG's investigation
report.
4.5. Learned Additional Solicitor General for CCI has
further argued that Section 26(1) is only the starting point of the
process and it has to be interpreted/viewed through the lens of
the other sub-clauses of Section 26 of the Act of 2002. It has
been further contended that the Scheme of the Act allows any
person even other than the aggrieved person to file an
information under Section 19 and under Section 26(1) stage the
CCI does not have the benefit of thorough fact finding
exercise/investigation carried out by the expert investigator
(DG) appointed for this very purpose under the Act of 2002 r/w
CCI (General) Regulations, 2009. It has been contended that
the only requirement is of a prima facie case for passing an
order under Section 26(1). She has further contended that the
order passed by the CCI establishes that the allegations and
material brought before it were serious enough to warrant an
investigation and the expression of a prima facie case at this
stage, when the enquiry is yet to take place, cannot and ought
not to amount to a predetermination of the issues involved. It
has been further contended that the order passed under Section
26(1) entails no civil consequences and awaits an investigation
report by the by the DG and expert investigating authority for
competition matters and the CCI keeping in view the prima facie
material was justified in passing the order under Section 26(1).
It has also been brought to the notice of this Court that the CCI
as on 31.3.2019 out of 1008 cases has ordered investigation by
passing an order under Section 26(1) in only 422 cases and out
of 422 cases in which the investigation was ordered, ultimately
only in 135 cases findings have been arrived at in respect of
contravention and adverse findings have been arrived at
resulting in imposition of sanctions/penalties. Thus, the CCI has
duly and robustly applied its mind in all cases and especially in
the case in hand.
4.6. Learned Additional Solicitor General has placed
reliance upon the following judgment;
i) Cadila Healthcare Ltd., v. CCI, reported in (2018)
252 DLT 647 (DB) (Delhi High Court)
(paras 38, 43-44, P.2632, 2635-2637, Vol.13,
Flipkart's Writ Appeal)
ii) North East Petroleum Dealers Association v.
Competition Commission of India, reported in
2016 CompLR 71 (CompAT) (para 9, p.3337,
Vol.16, Flipkart's Writ Appeal)
iii) Karnataka Film Chamber of Commerce v.
Kannada Grahakara Koota, W.P.No.19000/2013
(para 9, P.2578, Vol.13,Flipkart's Writ Appeal).
iv) CCI v. Grasim Industries, reported 2019 SCC
Online Del 10017 (para 30-35, page 3373-3375;
Vol.17, Flipkart's Writ Appeal)
v) Kingfisher Airlines Ltd. V. CCI, reported in (2010)
4 Comp LJ 557 (Bom) (para 6, p.278-293, List of
Cases - Vol.I, filed by CCI)
vi) It has also been endorsed in CCI v. Bharti Airtel,
reported in (2019) 2 SCC 521 (paras 116-118,
p.1897-1898, Vol.9, Flipkart's Writ Appeal).
vii) Whatsapp LLC v. CCI, W.P.(C) No.4378/2021,
Delhi High Court, decided on 22.4.2021.
5. In the connected matter i.e., WA.No.563/2021
filed by Amazon Seller Services Private Limited (hereinafter
referred to as Amazon), again the common order passed by the
learned Single Judge dated 11.6.2021 in W.P.No.3363/2020 is
under challenge.
5.1. It has been stated by the learned Senior counsel
for the appellant that the appellant/Amazon is a company
incorporated under the Companies Act, 1956 and it is classified
as a non Government Company. The company has been
operating the Amazon Marketplace, an online marketplace which
works with third party sellers, who offer for sale to customers a
wide variety of products, forming part of the Indian retail
market. It has been further stated that All India Online Vendors
Association (hereinafter referred to as AIOVA) under Section
19(1)(a) of the Act of 2002 submitted an information alleging
that Flipkart was dominant in the market for services provided
for online market platforms for selling goods in India and was
abusing its dominance under Section 4 of the Act of 2002,
thereby allegations of deep discounting, preferential treatment
accorded to certain sellers, such as, WS Retail Services Private
Limited and leveraging its dominant position to promote its
private labels such as "Smartbuy" and "Billion".
5.2. The contention of the learned counsel for the
appellant is that the CCI after granting an opportunity of hearing
to the present appellant and by holding a preliminary conference
has passed an order on 6.11.2018 dismissing the information
filed by AIOVA in terms of Section 26(2) of the Act of 2002.
(AIOVA case)
5.3. It has been further stated that the appellant has
been subjected to undue harassment on account of various writ
petitions preferred before various High Courts by CAIT and its
affiliates. A petition was preferred before the Delhi High Court
alleging violation of FDI policy i.e., W.P.No.9332/2018 - CAIT
vs. Union of India and the Delhi High Court by an order dated
5.9.2018 has disposed of the said writ petition noticing that the
Flipkart was located in Bengaluru and the averments contained
in the writ petition would be considered by the Enforcement
Directorate and if any enquiry or investigation was warranted,
steps in that regard would be taken by the concerned
authorities.
5.4. It has been further stated that after disposal of
the writ petition filed by CAIT before the Delhi High Court,
another writ petition was preferred i.e., W.P.No.7907/2018 filed
by Telecom Watchdog before the Delhi High Court on 28.7.2018
and the appellant was made a party. It has been further stated
that the High Court was informed that a similar issue was
pending and therefore, vide order dated 18.3.2019 the Delhi
High Court disposed of the writ petition.
5.5. It has been further stated that the CAIT has filed
another writ petition before the Rajasthan High Court ie.,
W.P.No.14400/2019 and one more writ petition was filed before
the Rajasthan High Court i.e., W.P.No.15570/2019 by the
Marwar Chamber of Commerce and Industry and the same issue
was agitated before the Rajasthan High Court. Therefore, the
contention of the appellant is that the CAIT and various affiliated
disgruntled trader lobbies were taking recourse to the legal
process before the High Courts as well as the CCI by invoking
their jurisdiction simultaneously on substantially identical
assertions inter alia issues of deep discounting practices,
influencing the pricing of goods and preferential treatment by
the appellant's online market place.
5.6. It has been stated that based upon an
information submitted by CAIT, without granting a single
opportunity to the appellant to respond to the allegations and to
explain its position, the CCI has passed the prima facie order
directing the Director General, CCI, to cause an investigation to
be initiated against the appellant/Amazon. It has been stated
that the CCI decided to accord a personal hearing to the
appellant/Amazon in AIOVA case barely a year ago and now
without hearing the appellant, an order has been passed by the
CCI directing an enquiry. The same was challenged before the
learned Single Judge and the learned Single Judge has dismissed
the writ petition.
5.7. The appellant has raised various grounds before
this Court while challenging the order passed by the learned
Single Judge and it has been stated that the learned Single
Judge has failed to exercise the power of judicial review vested
in the Court under Article 226 of the Constitution of India to
interfere with a manifestly unwarranted, arbitrary, unreasonable
order passed by the CCI, which resulted in civil consequences
against the appellant. It has been further contended that the
learned Single Judge has failed to appreciate that prima facie the
order passed by the CCI was ultra vires the objective and
purpose of the Act of 2002 and it has been contended that the
learned Single Judge has failed to appreciate that the Summum
Bonum of the Act of 2002 itself was to foster competition within
India. It has been further contended that the learned Single
Judge has failed to appreciate that an online market place, which
by its very design is an instrument to promote competition could
not be treated as anti-competitive, unless there was a clear and
cogent evidence to that effect.
5.8. It has been further stated that the learned Single
Judge has failed to appreciate that the CCI had failed to furnish
either clear or cogent evidence to support the prima facie order.
It has been further contended that the learned Single Judge has
failed to appreciate that the overreaching public purpose was the
objective which underlay the Act of 2002 ( CCI vs. SAIL). It has
been further contended that the learned Single Judge has failed
to appreciate that the said decision was rendered on the basis
that the confidentiality would be maintained by the CCI in
respect of prima facie order passed under Section 26(1) of the
Act of 2002, which persuaded the Court to take the view that the
said orders are administrative in character, however, the CCI did
not concede that ever since 16.1.2013 it was publicizing the
orders passed under Section 26(1) of the Act of 2002, as a
consequence of which the basis of the said decision, itself was
displaced.
5.9. Another ground raised before this Court is that
the learned Single Judge has failed to appreciate the true effect
and purport of the judgment of the Hon'ble Supreme Court in
the case of Competition Commission of India v. Bharti
Airtel Limited, reported in (2019) 2 SCC 521. It has been
further contended that the learned Single Judge has failed to
appreciate that the prima facie order of the CCI did not disclose
any application of mind in relation to: (a) ensuring consumer
wellbeing; (b) ensuring adequate and affordable choices for
consumers; (c) noticing that a level playing field in fact existed;
and (d) noticing that the marketplace protected competition. It
has been further contended that the CCI was unable to adduce
any material before the learned Single Judge that any of these
factors were disturbed.
5.10. It has been further contended that the learned
Single Judge has failed to appreciate that if a marketplace
allowed functioning without any form of discrimination and
permitted anyone to sell their goods in the marketplace, then
greater competition resulted, and accordingly the prima facie
order failed to the touchstone of Wednesbury unreasonableness.
It has been further contended that the learned Single Judge has
failed to appreciate that all the search and algorithms employed
by the appellant are responsive to consumer's preferences, such
as, delivery speed and customer ratings. It has been further
contended that the learned Single Judge has failed to appreciate
that the CCI in its "Market Study on E-Commerce In India: Key
Findings and Observations" ("Market Study Report") had
acknowledged the efficiencies generated by online marketplaces,
such as, increased price transparency and the consequent ease
in pricing comparison for consumers and allowing business to
have an online presence without being required to operate their
own websites.
5.11. It has been further stated that the learned Single
Judge has failed to appreciate that the prima facie order of the
CCI effectively initiated an investigation against an online
marketplace which itself existed for the purpose of facilitating
the competition, and for which purpose, the Foreign Direct
Investment policy permitted a 100% Foreign Direct Investment
(hereinafter referred to as FDI) in the marketplace-based model
of e-commerce. It has been further stated that the learned
Single Judge has failed to apply the suitable standards of judicial
review keeping in view the judgment delivered by the Hon'ble
Supreme Court in the case of Rohtas Industries Limited v.
S.D.Agarwal & Anr, reported in 1969(1) SCC 325. It has been
further contended that the learned Single Judge has failed to
appreciate the dictum of the Hon'ble Supreme Court in the case
of 63 Moons Technologies Limited v. Union of India,
reported in (2019) 18 SCC 401, which affirm the law laid down
in Barium Chemicals v. Company Law Board, reported in
(1966) Supp. SCR 311. It has been further argued that the
learned Single Judge has failed to appreciate the decision of the
Bombay High Court delivered in the case of Star India v.
Competition Commission of India, reported in (2019) SCC
Online Bom 3038, even though it has not been stayed by the
Hon'ble Supreme Court in the appeal, which is pending before
the Supreme Court.
5.12. It has been further contended that the learned
Single Judge has failed to appreciate that the formation of a
prima facie view was in the nature of an "essential and
mandatory findings before CCI could direct investigation" and its
absence vitiated the prima facie order. It has been further
contended that the CCI before passing an order under Section
26(1) of the Act of 2002 could not arrive at a conclusion that a
prima facie case exists keeping in view Section 19(3) of the Act
(AAEC). It has been further contended that the learned Single
Judge has failed to appreciate the jurisdictional aspect of the
matter and the jurisdiction of the CCI in passing the order in the
absence of cogent material before it. It has been further
contended that the learned Single Judge has failed to appreciate
that the CCI fell into serious error when it concluded that there
was a prima facie evidence of deep discounting on smartphones
when in fact the e-mail related to "gym equipments".
5.13. It has been further contended that the learned
Single Judge has failed to appreciate that Cloudtail Private
Limited and Appario Retail Private Limited were not related to
the appellant/Amazon in any manner, either through common
share holding or Directors. Hence, the order passed by the CCI
deserves to be set aside.
5.14. Much has been argued in respect of the
relationship between the appellant/Amazon, Cloudtail and
Appario and it has been stated that no relation of any kind exists
between the Amazon, Cloudtail and Appario. It has been stated
that the learned Single Judge has failed to appreciate the
judgment delivered in the case of Amazon Sellers Services
Private Limited v. Amway India Enterprises Private
Limited, reported in (2020) SCC Online Del 454.
5.15. Various other grounds have been raised in the
writ appeal challenging the order passed by the CCI and it has
been vehemently argued that there exists no material for
directing initiation of an enquiry by the Director General and the
action of the CCI in passing the order is in violation of the
principles of natural justice and fair play. It has been further
contended that the learned Single Judge has failed to appreciate
the fact that CAIT/respondent No.4 had in fact issued a demand
draft for a sum of Rs.50,000/- accompanying the information
filed by the informant and was in fact the front for alleging the
case against the appellant.
5.16. The learned Senior counsel for the
appellant/Amazon has placed reliance upon the following
judgements;
1) Udyami Evam Khadi Gramodyog Welfare
Sanstha v. State of U.P, reported in (2008) 1 SCC
560;
2) Mohinder Singh Gill v. Chief Election Commr.,
reported in (1978) 1 SCC 405;
and his contention is that the learned Single Judge has failed to
appreciate the law laid down by the Hon'ble Supreme Court in
the aforesaid cases and in fact by no stretch of imagination
enquiry could have been ordered keeping in view the facts and
circumstances of the case and the observations made in the
prima facie order are likely to cause serious prejudice to the
reputation and goodwill of the appellant amongst third party
sellers and brands which list their products on the Amazon
marketplace. A prayer has been made for setting aside the
order passed by the learned Single Judge dated 11.6.2021 as
well as for quashment of the prima facie order dated 13.1.2020.
6. Respondent No.2/Delhi Vypaar
Mahasangh/informant in the present case has vehemently
argued before this Court that the question of grant of
opportunity of hearing while passing an order under Section
26(1) of the Act of 2002 does not arise and it is an order passed
based upon the information submitted by respondent No.2. It
has been further argued that the appellants/Flipkart and Amazon
want to crush the proceedings at the threshold and they are not
permitting the CCI to proceed ahead in the matter on some
pretext or the other. It has been further contended that the
principles of natural justice and fair play will certainly be
observed and followed as argued by the learned Additional
Solicitor General of India on behalf of CCI while conducting an
enquiry and the appellants should not feel shy in producing the
material i.e., various agreements executed with various parties
during the course of the enquiry. It has been further contended
that no prejudice has been caused to the appellants and the
appellants in fact do not want to cooperate with the enquiry and
the same frustrates the object of the Act of 2002.
7. Learned counsel for respondent
No.4/Confederation of All India Traders has also supported the
arguments canvassed by the learned Additional Solicitor General
of India and a prayer has been made to dismiss the writ appeals
with costs.
8. Heard the learned counsel for the parties at
length and perused the record. The matter is being disposed of
with the consent of the learned counsel for the parties at
admission stage itself.
9. The relevant statutory provisions under the Act of
2002 which are necessary to decide the present writ appeals are
reproduced as under;
"2. Definitions.--In this Act, unless the context otherwise
requires--
***
(c) "cartel" includes an association of producers, sellers,
distributors, traders or service providers who, by agreement
amongst themselves, limit, control or attempt to control the
production, distribution, sale or price of, or, trade in goods or
provision of services;
***
(f) "consumer" means any person who--
(i) buys any goods for a consideration which has been paid
or promised or partly paid and partly promised, or under
any system of deferred payment and includes any user of
such goods other than the person who buys such goods for
consideration paid or promised or partly paid or partly
promised, or under any system of deferred payment when
such use is made with the approval of such person,
whether such purchase of goods is for resale or for any
commercial purpose or for personal use;
(ii) hires or avails of any services for a consideration which
has been paid or promised or partly paid and partly
promised, or under any system of deferred payment and
includes any beneficiary of such services other than the
person who hires or avails of the services for consideration
paid or promised, or partly paid and partly promised, or
under any system of deferred payment, when such
services are availed of with the approval of the first-
mentioned person whether such hiring or availing of
services is for any commercial purpose or for personal use;
***
(l) "person" includes--
(i) an individual;
(ii) a Hindu undivided family;
(iii) a company;
(iv) a firm;
(v) an association of persons or a body of individuals,
whether incorporated or not, in India or outside India;
(vi) any corporation established by or under any Central,
State or Provincial Act or a government company as
defined in Section 617 of the Companies Act, 1956 (1 of
1956);
(vii) any body corporate incorporated by or under the laws
of a country outside India;
(viii) a cooperative society registered under any law
relating to cooperative societies;
(ix) a local authority;
(x) every artificial juridical person, not falling within any of
the preceding sub-clauses;
***
3. Anti-competitive agreements.--(1) No enterprise or
association of enterprises or person or association of persons
shall enter into any agreement in respect of production,
supply, distribution, storage, acquisition or control of goods or
provision of services, which causes or is likely to cause an
appreciable adverse effect on competition within India.
***
(3) Any agreement entered into between enterprises or
associations of enterprises or persons or associations of
persons or between any person and enterprise or practice
carried on, or decision taken by, any association of enterprises
or association of persons, including cartels, engaged in
identical or similar trade of goods or provision of services,
which--
(a) directly or indirectly determines purchase or sale
prices;
***
(4) Any agreement amongst enterprises or persons at
different stages or levels of the production chain in different
markets, in respect of production, supply, distribution,
storage, sale or price of, or trade in goods or provision of
services, including--
***
(e) resale price maintenance,
***
18. Duties of Commission.--Subject to the provisions of
this Act, it shall be the duty of the Commission to eliminate
practices having adverse effect on competition, promote and
sustain competition, protect the interests of consumers and
ensure freedom of trade carried on by other participants, in
markets in India:
Provided that the Commission may, for the purpose of
discharging its duties or performing its functions under this
Act, enter into any memorandum or arrangement with the
prior approval of the Central Government, with any agency of
any foreign country.
19. Inquiry into certain agreements and dominant
position ofenterprise.--(1) The Commission may inquire
into any alleged contravention of the provisions contained in
sub-section (1) of Section 3 or sub-section (1) of Section 4
either on its own motion or on--
(a) receipt of any information, in such manner and
accompanied by such fee as may be determined by
regulations, from any person, consumer or their association
or trade association; or
(b) a reference made to it by the Central Government
or a State Government or a statutory authority.
***
26. Procedure for inquiry under Section 19.--(1) On
receipt of a reference from the Central Government or a State
Government or a statutory authority or on its own knowledge
or information received under Section 19, if the Commission is
of the opinion that there exists a prima facie case, it shall
direct the Director General to cause an investigation to be
made into the matter:
Provided that if the subject-matter of an information
received is, in the opinion of the Commission, substantially the
same as or has been covered by any previous information
received, then the new information may be clubbed with the
previous information.
(2) Where on receipt of a reference from the Central
Government or a State Government or a statutory authority or
information received under Section 19, the Commission is of
the opinion that there exists no prima facie case, it shall close
the matter forthwith and pass such orders as it deems fit and
send a copy of its order to the Central Government or the
State Government or the statutory authority or the parties
concerned, as the case may be.
***
35. Appearance before Commission.--A person or an
enterprise or the Director General may either appear in person
or authorise one or more chartered accountants or company
secretaries or cost accountants or legal practitioners or any of
his or its officers to present his or its case before the
Commission.
Explanation.--For the purposes of this section--
(a) "chartered accountant" means a chartered
accountant as defined in clause (b) of sub-section (1) of
Section 2 of the Chartered Accountants Act, 1949 (38 of
1949) and who has obtained a certificate of practice under
sub-section (1) of Section 6 of that Act;
(b) "company secretary" means a company secretary
as defined in clause (c) of sub-section (1) of Section 2 of the
Company Secretaries Act, 1980 (56 of 1980) and who has
obtained a certificate of practice under sub-section (1) of
Section 6 of that Act;
(c) "cost accountant" means a cost accountant as
defined in clause (b) of sub-section (1) of Section 2 of the
Cost and Works Accountants Act, 1959 (23 of 1959) and
who has obtained a certificate of practice under sub-section
(1) of Section 6 of that Act;
(d) "legal practitioner" means an advocate, vakil or
an attorney of any High Court, and includes a pleader in
practice.
***
45. Penalty for offences in relation to furnishing of
information.--(1) Without prejudice to the provisions of
Section 44, if a person, who furnishes or is required to furnish
under this Act any particulars, documents or any
information--
(a) makes any statement or furnishes any document
which he knows or has reason to believe to be false in any
material particular; or
(b) omits to state any material fact knowing it to be
material; or
(c) wilfully alters, suppresses or destroys any
document which is required to be furnished as aforesaid,
such person shall be punishable with fine which may extend to
rupees one crore as may be determined by the Commission.
(2) Without prejudice to the provisions of sub-section
(1), the Commission may also pass such other order as it
deems fit.
***
53-B. Appeal to Appellate Tribunal.--(1) The Central
Government or the State Government or a local authority or
enterprise or any person, aggrieved by any direction, decision
or order referred to in clause (a) of Section 53-A may prefer
an appeal to the Appellate Tribunal.
(2) Every appeal under sub-section (1) shall be filed
within a period of sixty days from the date on which a copy of
the direction or decision or order made by the Commission is
received by the Central Government or the State Government
or a local authority or enterprise or any person referred to in
that sub-section and it shall be in such form and be
accompanied by such fee as may be prescribed:
Provided that the Appellate Tribunal may entertain an
appeal after the expiry of the said period of sixty days if it is
satisfied that there was sufficient cause for not filing it within
that period.
(3) On receipt of an appeal under sub-section (1), the
Appellate Tribunal may, after giving the parties to the appeal,
an opportunity of being heard, pass such orders thereon as it
thinks fit, confirming, modifying or setting aside the direction,
decision or order appealed against.
(4) The Appellate Tribunal shall send a copy of every
order made by it to the Commission and the parties to the
appeal.
(5) The appeal filed before the Appellate Tribunal under
sub-section (1) shall be dealt with by it as expeditiously as
possible and endeavour shall be made by it to dispose of the
appeal within six months from the date of receipt of the
appeal.
***
53-N. Awarding compensation.--(1) Without prejudice to
any other provisions contained in this Act, the Central
Government or a State Government or a local authority or any
enterprise or any person may make an application to the
Appellate Tribunal to adjudicate on claim for compensation
that may arise from the findings of the Commission or the
orders of the Appellate Tribunal in an appeal against any
findings of the Commission or under Section 42-A or under
sub-section (2) of Section 53-Q of the Act, and to pass an
order for the recovery of compensation from any enterprise
for any loss or damage shown to have been suffered, by the
Central Government or a State Government or a local
authority or any enterprise or any person as a result of any
contravention of the provisions of Chapter II, having been
committed by enterprise.
(2) Every application made under sub-section (1) shall
be accompanied by the findings of the Commission, if any,
and also be accompanied with such fees as may be
prescribed.
(3) The Appellate Tribunal may, after an inquiry made
into the allegations mentioned in the application made under
sub-section (1), pass an order directing the enterprise to
make payment to the applicant, of the amount determined by
it as realisable from the enterprise as compensation for the
loss or damage caused to the applicant as a result of any
contravention of the provisions of Chapter II having been
committed by such enterprise:
Provided that the Appellate Tribunal may obtain the
recommendations of the Commission before passing an order
of compensation.
(4) Where any loss or damage referred to in sub-section
(1) is caused to numerous persons having the same interest,
one or more of such persons may, with the permission of the
Appellate Tribunal, make an application under that sub-section
for and on behalf of, or for the benefit of, the persons so
interested, and thereupon, the provisions of Rule 8 of Order 1
of the First Schedule to the Code of Civil Procedure, 1908 (5
of 1908), shall apply subject to the modification that every
reference therein to a suit or decree shall be construed as a
reference to the application before the Appellate Tribunal and
the order of the Appellate Tribunal thereon.
Explanation.--For the removal of doubts, it is hereby
declared that--
(a) an application may be made for compensation before
the Appellate Tribunal only after either the Commission or
the Appellate Tribunal on appeal under clause (a) of sub-
section (1) of Section 53-A of the Act, has determined in a
proceeding before it that violation of the provisions of the
Act has taken place, or if provisions of Section 42-A or sub-
section (2) of Section 53-Q of the Act are attracted.
(b) enquiry to be conducted under sub-section (3) shall
be for the purpose of determining the eligibility and
quantum of compensation due to a person applying for the
same, and not for examining afresh the findings of the
Commission or the Appellate Tribunal on whether any
violation of the Act has taken place.
***
53-S. Right to legal representation.--(1)-(2) * * *
(3) The Commission may authorise one or more chartered
accountants or company secretaries or cost accountants or
legal practitioners or any of its officers to act as presenting
officers and every person so authorised may present the case
with respect to any appeal before the Appellate Tribunal.
Explanation.--The expressions "chartered accountant"
or "company secretary" or "cost accountant" or "legal
practitioner" shall have the meanings respectively assigned to
them in the Explanation to Section 35.
53-T. Appeal to Supreme Court.--The Central Government
or any State Government or the Commission or any statutory
authority or any local authority or any enterprise or any
person aggrieved by any decision or order of the Appellate
Tribunal may file an appeal to the Supreme Court within sixty
days from the date of communication of the decision or order
of the Appellate Tribunal to them:
Provided that the Supreme Court may, if it is satisfied that
the applicant was prevented by sufficient cause from filing the
appeal within the said period, allow it to be filed after the
expiry of the said period of sixty days."
(emphasis supplied)
The relevant regulations that are contained in the
Competition Commission of India (General) Regulations,
2009 ("the 2009 Regulations") are set out as under:
"2. Definitions.--(1) In these Regulations, unless the context
otherwise requires--
* * *
(i) "Party" includes a consumer or an enterprise or a
person defined in clauses (f), (h) and (l) of Section 2 of the
Act respectively, or an information provider, or a consumer
association or a trade association or the Director General
defined in clause (g) of Section 2 of the Act, or the Central
Government or any State Government or any statutory
authority, as the case may be, and shall include an
enterprise against whom any inquiry or proceeding is
instituted and shall also include any person permitted to join
the proceedings or an intervener;
* * *
10. Contents of information or the reference.--(1) The
information or reference [except a reference under sub-
section (1) of Section 49 of the Act] shall, inter alia,
separately and categorically state the following seriatim--
(a) legal name of the person or the enterprise giving the
information or the reference;
(b) complete postal address in India for delivery of summons
or notice by the Commission, with Postal Index Number
(PIN) code;
(c) telephone number, fax number and also electronic mail
address, if available;
(d) mode of service of notice or documents preferred;
(e) legal name and address(es) of the enterprise(s) alleged
to have contravened the provisions of the Act; and
(f) legal name and address of the counsel or other
authorised representative, if any;
(2) The information or reference referred to in sub-
regulation (1) shall contain--
(a) a statement of facts;
(b) details of the alleged contraventions of the Act together
with a list enlisting all documents, affidavits and evidence,
as the case may be, in support of each of the alleged
contraventions;
(c) a succinct narrative in support of the alleged
contraventions;
(d) relief sought, if any;
(da) details of litigation or dispute pending between the
informant and parties before any court, tribunal, statutory
authority or arbitrator in respect of the subject-matter of
information;
(e) Such other particulars as may be required by the
Commission.
(3) The contents of the information or the reference
mentioned under sub-regulations (1) and (2), along with the
appendices and attachments thereto, shall be complete and
duly verified by the person submitting it."
10. The record of the case reveals that respondent
No.2 - Delhi Vyapar Mahasangh filed an information on
24.10.2019 to CCI under Section 19(1)(a) of the Act of 2002
against both the appellants alleging that the appellants are
involved in alleged anti-competitive practices and conduct, such
as deep discounting, preferential listing, sale of private label
brands through preferential sellers and exclusive tie-ups, alleged
to be in violation of Section 3(1) read with Section 3(4) of the
Act of 2002. The CCI based upon the information received by it,
has passed an order dated 13.1.2020 in Case No.40/2019
directing an investigation under Section 26(1) of the Act of 2002
by the Director General.
11. The order passed by the CCI dated 13.1.2020 is
reproduced as under;
Directions for investigation under Section 26(1) of the
Competition Act, 2002
1. The present information has been filed by Delhi
Vyapar Mahasangh (hereinafter,referred to as
'Informant'/'DVM'), a society registered under the Societies
Registration Act, 1860 under Section 19(1)(a) of the
Competition Act, 2002 (hereinafter, the 'Act') alleging
contravention, of the relevant provisions of Section 3(4)
read with Section 3(1) and Section 4(2) read with Section
4(1) of the Act, by Flipkart Internet Services Pvt. Ltd.
(hereinafter, 'Flipkart/Flipkart marketplace') and Amazon
Seller Services Pvt. Ltd. (hereinafter, 'Amazon/Amazon
marketplace'). Flipkart and Amazon are, hereinafter,
collectively referred to as 'Opposite Parties/'OPs'
Facts and Allegations, as stated in the Information
2. As stated, the Informant's members comprise many
Micro, Small and Medium Enterprises ('MSME') traders
which rely on trade of smartphones and related
accessories. It is stated that many such traders regularly
list their smart phones for sale on online marketplaces to
take the benefit of online distribution channel.
3. Flipkart, having its registered office in Bengaluru, is an
ecommerce portal operating as a platform facilitating third
party sellers to sell their goods to consumers on its online
marketplace.
4. Amazon marketplace, having its registered office at
Bengaluru, is the marketplace affiliate of Amazon.com Inc.,
a multi-national technology company based in Seattle,
Washington and operates the Amazon India e-commerce
portal, operating as a platform facilitating third party sellers
to sell their goods to consumers on its online marketplace.
5. The Informant states that there are instances of
several vertical agreements between (i) Flipkart with their
preferred sellers on the platform and (ii) Amazon with their
preferred sellers, respectively which have led to a
foreclosure of other non-preferred traders or sellers from
these online marketplaces. It has been alleged that most of
these preferred sellers are affiliated with or controlled by
Flipkart or Amazon, either directly or indirectly.
Allegations under Section 3(4) of the Act
6. The Informant alleges that there is a clear violation of
Section 3(4) read with Section 3(1) of the Act. Allegedly,
there is an existence of various vertical arrangements
between (i) Flipkart with their preferred sellers on the
platforms; and (ii) Amazon with their preferred sellers on
the platforms, respectively which leads to a foreclosure of
other non-preferred sellers from the online marketplace.
These preferred sellers are also alleged to be affiliated with
or controlled by Flipkart/Amazon either directly or
indirectly.
7. Further, these platforms are allegedly capable of
influencing prices being charged by sellers by providing
several discounts as well as inventory (in the form of
private labels at the B2B level) to the sellers. OPs also
gather data on consumer preferences and allegedly use
them to their advantage. As per the information, the
agreements/arrangements between Amazon and its sellers
and Flipkart and its sellers respectively can be said to be in
violation of Section 3 (1) of the Act which isan omnibus
clause. The Informant has alleged that the OPs are involved
in following practices which are anti-competitive in view of
Section 3(1) read with Section 3(4) of the Act.
7.1.Deep discounting:
7.1.1.Flipkart provides deep discounts to a select few
preferred sellers (such as Omnitech Retail)on its platform
which adversely impacts non-preferred sellers such as
members of the Informant from competing with such
sellers on Flipkart's online platform. The Informant alleged
that there is evidence in the form of communications from
Flipkart to its sellers stating that it would incur a part of the
cost during the Big Billion Days (BBD)sales or Diwali sales
etc. However, no such opportunity is available to other
sellers who are, thus, unable to compete with such
preferred sellers.
7.1.2.Amazon has preferred sellers on its platform
namely Cloudtail India (a joint venture between Amazon
and Catamaran Ventures) and Appario Retail (a wholly
owned subsidiary of a joint venture between Amazon and
Mr. Ashok Patni which received a round of investment from
Frontizo Business Services Ltd.) which are related to
Amazon. Similar allegations of deep discounts by Amazon
to the detriment of non-preferred sellers have been
levelled. Further, the fact that Amazon and these preferred
sellers have the same contact details are also evidence of
linkage between them. Moreover, Amazon has its own
private label brands which are sold only through these
preferred sellers.
7.2.Preferential Listing
7.2.1.Flipkartlends the word "Assured Seller" to the
products sold by its preferred sellers such as Vision Star,
Flashstar Commerce and Flashtech Retail (since July 2017),
and allegedly create sa bias in favour of preferred sellers to
the detriment of other sellers. Besides receiving deep
discounts, such assured sellers also receive preferential
listing on the website of Flipkart, pushing the results of the
non-preferred sellers further down in the search results
without any basis whatsoever.
7.2.2.Amazon lends the word "Fulfilled" to the products
sold by preferred sellers and further allegedly creates
search bias by listing its preferred sellers in the first few
pages of the search results. The products sold by Cloudtail
India and Appario Retail allegedly dominate first few pages
of search results whereas the products with the same
ratings sold by non-preferred sellers are listed on later
pages.
7.3.Exclusive Tie-ups and Private Labels: Both the OPs
have several tie-ups and private labels which get more
preference in terms of sales. The OPs' private label brands,
sold through their platforms, are routed through a few
preferential sellers. It is submitted by the Informant that
this modus operandiis being employed by Flipkart across all
categories, including smartphones. It is alleged that by
having exclusive tie-ups in the relevant market with the
smartphone companies, it provides exclusivity through
discounting and preferential listings. 7.4.This leads to other
competitors being excluded and foreclosed from the
market. It is stated that any benefit to the consumers is
only apparent at the initial stage till critical mass of
network effects is reached or competitors are eliminated.
This arrangement has far-reaching consequences on the
economy as the non-preferred sellers are relegated to sell
only through traditional brick and mortar set-up which
involves significant fixed costs and are devoid of wide pan-
India reach which online marketplaces offer.
Market Power
8. It is alleged that Amazon and Flipkart are able to
cross-subsidise because of the huge amount of funding
received from their investors, which has resulted in
incentives that allow pricing below cost on their platforms,
through their sellers, resulting in creation of high entry
barriers and high capital costs for any new entrant in the
market. Resultantly, the existing sellers find it difficult to
launch their own portals or marketplaces in order to
compete with the OPs.
9. The Informant averred that the OPs have the ability to
unilaterally terminate their agreements with non-preferred
sellers without assigning any reason as a result of which
non-preferred sellers have no option but to comply with
their mandates (Clause 3 of Amazon Seller Agreement).
Thus, unreasonable vertical restraints are created.
Sections 4(2)(a)(ii); 4(2)(b)(ii) and 4(2)(c) allegations
10. Both Flipkart and Amazon are alleged to be
jointly dominant in the relevant market and are stated to
be abusing their dominance in the present case.
10.1.Both OPs individually and jointly have extremely high
market shares in the relevant market. Flipkart itself held
more than 53 % of the market shares in the relevant
market in the first quarter of 2019 and Amazon held 36%
of the market shares in the relevant market in the first
quarter of 2019. Market shares, while not the only source
of dominance, can be categorized as an important factor for
determining dominance.
10.2.Due to deep pockets, OPs are able to facilitate their
sellers'predatory pricing on their respective platforms.
10.3.The OPs have been limiting the provisions of service
and market of MSMEs and other small retailers by creating
a separate 'preferential list'. The preferred sellers are put
into an advantageous position as their names appear on
the initial pages as compared to the non-preferred sellers,
despite selling product with 'identical rating'. Thus, there
has been restriction of services in the market.
10.4.Due to huge market base and market power, the OPs
have large repositories of data which allow them to target
advertisements based on consumer preferences and
marginalise other competitors which are unable to capture
the market due to lack of access to data. This has resulted
in creation of high entry barriers on account of network
effects.
10.5. Both OPs havethe ability to unilaterally terminate
agreements with their sellers without any reason and treat
them arbitrarily.
11. Based on the above, the Informant alleged
that Flipkart and Amazon have established an inherently
anticompetitive model for e-commerce which consists of
providing deep discounts and preferential treatment to a
select few preferential sellers on their platform and the
same merits examination by the Commission.
12. It is, thus, prayed by the Informant that an
investigation be caused into the matter and the OPs be
directed to cease and desist from indulging in anti-
competitive activities and maximum penalty under Section
27 of the Act be imposed upon the OPs.
13. After considering the matter on 12.12.2019,
the Commission directed the Informant to file an affidavit
with supporting documents under Section 65-B of the
Indian Evidence Act, 1872 in respect of certain documents
annexed with the Information. The Informant filed the said
affidavit on 10.01.2020.
14. The Commission has carefully perused the
information, documents filed by the Informant and relevant
information available in the public domain.
15. At the outset, the Commission notes that the
Informant has levelled allegations against Flipkart and
Amazon marketplaces under Section 4 of the Act on
account of joint dominance. The Commission notes that it is
a settled position that the Act does not provide for inquiry
into or investigation into the cases of joint/collective
dominance as the same is not envisaged by the provisions
of the Act. Therefore, the Commission need not deliberate
further on allegations on account of joint dominance as the
same being untenable under the Act.
16. The Commission notes that Flipkart
marketplace and Amazon marketplace are e-commerce
entities, following a marketplace based model of e-
commerce. They essentially provide online intermediation
services to sellers on one side and consumers on the
other.These platforms/marketplaces and the sellers selling
on these platforms operate at different stages of the
vertical/supply chain. Thus, any agreement between the
platforms and sellers selling through these platforms can
be examined under section 3(4) of the Act, which deals
with agreements amongst enterprises or persons at
different stages or levels of the production chain in
different markets, in respect of production, supply,
distribution, storage, sale or price of, or trade in goods or
provision of services. For the sake of convenience, the
section is reproduced herein below:
"3(4) Any agreement amongst enterprises or persons at
different stages or levels of the production chain in
different markets, in respect of production, supply,
distribution, storage, sale or price of, or trade in goods or
provision of services, including--
(emphasis supplied)
17. It is also pertinent to note that the definition
of 'Agreement' under the Act is an encompassing/inclusive
one. It includes any arrangement, understanding or action
in concert neither necessarily in writing nor intended to be
enforceable by legal proceedings. Further, the list of
vertical agreements provided under Section 3(4) of the Act
is an inclusive one.
18. Online intermediation services have been
identified as key enablers of entrepreneurship which offer
access to new markets to sellers/business users and
increase the consumers' choice of goods and services.
These services form a fulcrum of the commercial success of
the sellers who avail such services to reach consumers on
the platform. At the same time, online platforms providing
intermediation services result in the growing dependence of
businesses on these platforms.
19. The IT industry body the National
Association of Software and Services Companies (Nasscom)
estimated that the Indian ecommerce market was $33
billion in 2017-18 that reached $38.5 billion during 2018-
19. Flipkart and Amazon comprise bulk of the online retail
market in India.1Though these platforms are used for
selling various categories of products, for some categories
the online channel constitutes a predominant channel of
distribution. Smartphones is one such categoryof product.
The Informant has claimed that Amazon and Flipkart
had36% and 53% market share, respectively, in the
market for smartphones sold on online marketplaces in
India in the first quarter of the year 2019. Further, it is an
accepted position that strong network effects generate a
source of market power for such platforms. Large number
of users make an ecommerce platform more valuable,
which further attracts more users, platforms benefit from a
'positive feedback loop', which gives rise to market power.
20. On careful perusal of allegations levelled by
the Informant and the documents provided, the
Commission notes that there are four alleged practices on
the marketplaces, namely, exclusive launch of mobile
phones, preferred sellers on the marketplaces, deep
discounting and preferential listing/promotion of private
labels.
21. The first issue under examination is that of
the exclusive launch of mobile phones on the two major e-
commerce platforms. The Informant has provided a list of
phones which were exclusively launched on the platforms.
The Informant has provided the following evidence in the
form of text messages, as shown below, to indicate that
due to partnership between mobile manufacturer (VivoZ1x
and Vivo U10 models) and platforms (Flipkart and
Amazon), offline retailers are forced to purchase
smartphones either from manufacturers' e-stores or from
the platforms e-portals.
Vivo Vivo
Hi Harshit, thank you for showing your Hi Harshit, thank you for showing
interest in vivo handsets. The handset your interest in vivo handset. We
vivo Zix will be available on our online E- would like to inform you that you
store and Flipkart.com portal only. The may purchase our Unstoppable U10
safe will be started from 13th September handset from our official E-Store:
19. For further information kindly check https://shop.vivo.com/in/product/10
our official E-store: 0077?Skuld=10283 and Amazon as
https://shop.vivo.com/in/product/10073? it will be available online only. The
skuld=1027| first sale will be on 29th of
September 2018.
Online shopping site for Mobiles,
Electronics, Furnit..... U10 (3+64)
Flipkart.com
22. The Commission has also noted several
reports in the media as well as advertisements by e-
commerce portals regarding exclusive launches. Mobile
manufacturing companies like One Plus, OPPO, and
Samsung have exclusively launched several of their models
on Amazon. Similarly, Vivo, Realme, Xiomi etc., have
exclusively launched several of heir models on Flipkart. In
2018, Flipkart launched 67 mobile phones and Amazon
launched 45 mobile phones exclusively on its
platform.2Thus, it appears that these mobile manufacturers
partner with the e-commerce platforms and their brands
are sold by the platforms' exclusive sellers.
23. The Informant hasalsoallegedthat Amazon
and Flipkart have their own set of preferred sellers and that
these preferred sellers have nexus with the e-commerce
platforms either by way of direct or indirect ownership or
some understanding. It is observed that there are only few
online sellers, which are selling these exclusively launched
smartphones either through Amazon or through Flipkart.
Based on the evidence adduced by the Informant and
information available in the public domain, it can be prima
facie inferred that there appears to be exclusive
partnership between smartphone manufacturers and e-
commerce platforms for exclusive launch of smartphone
brands. Thus, exclusive launch coupled with preferential
treatment to a few sellers and the discounting practices
create an ecosystem that may lead to an appreciable
adverse effect on competition.
24. The issue of deep discounting alleged by the
Informant needs to be assessed in the context of exclusive
agreement discussed in the foregoing paragraphs. The
Informant has furnished emails inter-alia dated
31.03.2019, 20.09.2019 etc.whereby communications were
allegedly sent by Flipkart and Amazon to their sellers for
incurring a part of the discounts offered during the big sale
events like the Big Billion Days (BBD) of Flipkart and the
Great Indian Festival of Amazon. At the same time, it is
alleged that preferred sellers at Amazon and Flipkart are in
some way or the other connected to Amazon and Flipkart,
respectively, through common investors, directors,
shareholders etc. Relying on these, it has been alleged that
these preferred sellers are extension of these
marketplaces, operating through different 'proxy' entities
blessed with the support of these marketplaces. The
Commission perused the prices for different smartphone
brands sold through Flipkart and Amazon, i.e. original price
and discounted price. It was observed that certain
smartphone brands/models are available at significantly
discounted price on these platforms and are sold largely
through the sellers identified, by the Informant, as the
platforms' 'preferred sellers'. Whether funding of discounts
is an element of the exclusive tie-ups is a matter that
merits investigation.
25. The issue of preferential listing should also
be viewed in conjunction with the foregoing. Competition
on the platforms may get influenced in favour of the
exclusive brands and sellers, through higher discounts and
preferential listing. Thus, the allegations are
interconnected, and warrant a holistic investigation to
examine how the vertical agreements operate, what are
the key provisions of such agreements and what effects do
they have on competition. Given that both the major
platforms are stated to follow the same mechanics in terms
of their exclusive tie ups and preferential terms with
brands/sellers, competition between the platforms prima
facie does not play a role in mitigating the potential
adverse effect on competition on the platforms.
26. Thus, the Commission observes that the
exclusive arrangements between smartphone/mobile phone
brands and e-commerce platform/select sellers selling
exclusively on either of the platforms, as demonstrated in
the information, coupled with the allegation of linkages
between these preferred sellers and OPs alleged by the
Informant merits an investigation. It needs to be
investigated whether the alleged exclusive arrangements,
deep-discounting and preferentia llisting by the OPs are
being used as an exclusionary tactic to foreclose
competition and are resulting in an appreciable adverse
effect on competition contravening the provisions of
Section 3 (1) read with Section 3(4) of the Act.
27. In view of the foregoing, the Commission is
of the opinion that there exists a prima facie case which
requires an investigation by the Director General ('DG'), to
determine whether the conduct of the OPs have resulted in
contravention of the provisions of Section 3(1) of the Act
read with Section 3(4) thereof, as detailed in this order.
28. Accordingly, the Commission directs the DG
to cause an investigation to be made into the matter under
the provisions of Section 26(1) of the Act. The Commission
also directs the DG to complete the investigation and
submit the investigation report within a period of 60 days
from the receipt of this order.
29. It is also made clear that nothing stated in
this order shall tantamount to a final expression of opinion
on the merits of the case and the DG shall conduct the
investigation without being swayed in any manner
whatsoever by the observations made therein.
30. The Secretary is directed to send a copy of
this order along with the material available on record to the
DG forthwith.
12. The aforesaid order was challenged before this
Court and the learned Single Judge, after holding that the
material was available for forming a prima facie opinion with the
CCI, has rightly issued an order directing an investigation under
Section 26(1) of the Act by the Director General.
13. The order passed by the learned Single Judge in
paragraphs 12 to 65 reads as under;
12. I have carefully considered rival contentions and
perused the records. Following points arise for
consideration in this case:
A. 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 Mahasangh has given information
against petitioners under Section 19(1)(a) of the Act
alleging contravention of Section 3(1) read with Section
3(4) and Section 4(1) read with Section 4(2) of the Act. It
has filed a summary of its case together with documents
which it has considered supportive of its allegations.
Though, the informant has alleged contravention of
Sections 3(1), 3(4), 4(1) and 4(2) of the Act, the
Commission has held that Act does not provide for an
enquiry or investigation in cases of Joint/Collective
dominance and has directed inquiry by the Director General
for alleged violation of Section 3(1) read with Section 3(4)
of the Act.
17. The informant has alleged that the petitioners have
entered into several vertical agreements with preferred
sellers and following aspects require investigation and
consideration by the Commission:
• Deep discounting;
• Preferential Listing; and
• Exclusive Tie-ups.
Deep Discounting
18. With regard to deep discounting the informant has
alleged that; Amazon has several preferred sellers and
notably among them are 'Cloudtail India' and 'Appario
Retail', which are related to Amazon. It provides incentives
to its preferred sellers to sell their products at 'predatory
prices' throughout the year to the detriment of non-
preferred sellers, who are not compensated for the amount
of loss which they would incur to keep competing in the
market.
19. 'Appario Retail' is wholly owned subsidiary of a
Joint Venture between Amazon and another entity. It has
received investments from Frontizo Business Services Pvt.
Ltd. Both Appario and Frontizo have common Director by
name Ankit Popat. Frontizo and Amazon Retail India Pvt.
Ltd., also have a common Director.
20. Cloudtail is a joint venture between Amazon and
Catamaran Ventures.
21. It is alleged that Flipkart follows a model of
providing deep discount to few preferential sellers such as
'Omnitech Retail', and it adversely impacts non-preferred
sellers. Flipkart sends communications to its sellers stating
that it would incur a part of the 'burn'.
22. Preferred sellers such as 'Omnitech Retail' are
connected with Flipkart. Flipkart's founder Sachin Bansal
and Binny Bansal owned WS Retail till 2012. Reports
confirm that more than 90% of Flipkart's sale is routed
through WS 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 place, in fact, petitioners promote only
selected few and do not maintain platform neutrality.
28. Shri. Abhir Roy, learned Advocate for CAIT
submitted that Amazon's market place is owned by M/s.
Amazon Sellers Services Pvt. Ltd. Adverting to Company's
Master data (at pages No.154 & 155 of Statement of
Objection by informant), he submitted that the said
Company and Amazon Retail India Pvt. Ltd. have a
common e-mail ID namely '[email protected]'. The
registered address of Amazon Sellers Pvt. Ltd., is in the 8th
Floor, Brigade Gateway, 26/1, Dr.Rajkumar Road,
Bengaluru. He pointed out that though the registered
office of Amazon Retail India Pvt. Ltd., is shown as Nehru
place, New Delhi, the place where Books of Accounts are
maintained, is shown as the registered office of Amazon
Seller Services Pvt. Ltd. (petitioner in W.P. No.3363/2020).
He submitted that these facts clearly establish that the
Contact e-mail ID of both Companies is the same and
maintenance of Books of Accounts of both Companies is at
the same address.
29. Shri. Abhir Roy further submitted that Amazon
Retail India Pvt. Ltd., and Frontizo Business Services Pvt.
Ltd., have a common Director by name Sameer Kshetrapal.
Appario Retail is a wholly owned subsidiary of Frontizo
business. He pointed out that this aspect has been
admitted by Amazon by stating thus in paragraph No.19 of
its rejoinder:
"19. That the contents of paragraph 22 of the
Objections are also denied. It is a matter of
public knowledge that Cloudtail India Pvt.
Ltd., ("Cloudtail") is a wholly owned
subsidiary of Prione Business Services Private
Limited ("Prione"), a Joint venture, wherein
Amazon Asia Pacific Resources Pvt. Ltd., and
Amazon Eurasia Holdings S.a.r.l, collectively hold a
minority, non-controlling interest of 24% shares. It
is submitted that Appario Retail Pvt. Ltd.,
("Appario") is a wholly owned subsidiary of
Frontizo Business Services Private Limited
("Frontizo"), a Joint venture wherein Amazon
Asia-Pacific Holdings Pvt. Ltd., and Zafar LLC
together hold a minority, non-controlling interest of
24%. While both, Cloudtail India and Appario Retail
are third party sellers, who partner with the
petitioner to offer products for sale to end
consumers on the Amazon market place, it is
denied that they are preferred sellers or that the
Petitioner has entered into any agreements with
either of them 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
paragraph No.7 of order dated 25.04.2018 in I.T.A.
No.202/Bang/2018, also contended that Flipkart's Senior
Vice President and Finance Controller of Flipkart Group, has
admitted in his statement before the Income Tax
Authorities that the strategy of selling at a price lower than
the cost price (predatory pricing) is to capture the market
and to earn profits in the long run.
33. With regard to the nature of the impugned order,
Smt. Madhavi Diwan, submitted that it is an administrative
order. In support of this submission, she relied upon CCI
Vs. SAIL and CCI Vs. Bharathi Airtel. She submitted that,
in CCI Vs. SAIL, it is held that threshold requirement for
establishing prima facie case at the stage of Section 26(1),
is a low threshold. She adverted to Martin Burn Ltd., Vs.
R.N. Banerjee, reported in 1958 SCR 514, and submitted
that prima facie case does not mean a case proved to the
hilt, but a case which can be said to be established, if the
evidence which is led in support of the same were believed.
34. It may be also be profitable to recall the words of
Lord Diplock in American Cyanamid Co Vs. Ethicon Ltd,
reported in (1975) 1 All E.R. 504, a case involving
injunction at interlocutory stage, wherein, that Court is not
justified in embarking upon anything resembling a trial of
the action upon conflicting affidavits in order to evaluate
the strength of either party's case.
35. Both petitioners and the Commission have placed
reliance on CCI Vs. SAIL and CCI Vs. Bharathi Airtel.
In CCI Vs. SAIL, it is held as follows:
38. In contradistinction, the direction under
Section 26(1) after formation of a prima facie
opinion is a direction simpliciter to cause an
investigation into the matter. Issuance of such a
direction, at the face of it, is an administrative
direction to one of its own wings departmentally
and is without entering upon any adjudicatory
process. It does not effectively determine any right
or obligation of the parties to the lis. Closure of the
case causes determination of rights and affects a
party i.e. the informant; resultantly, the said party
has a right to appeal against such closure of case
under Section 26(2) of the Act. On the other hand,
mere direction for investigation to one of the wings
of the Commission is akin to a departmental
proceeding which does not entail civil
consequences for any person, particularly, in light
of the strict 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 copy of the report, issue
notice, invite objections or suggestions from the
informant, the Central Government, the State
Government, statutory authorities or the parties
concerned, but also to provide an opportunity of
hearing to the parties before arriving at any final
conclusion under Sections 26(7) or 26(8) of the
Act, as the case may be. This obviously means
that wherever the legislature has intended
that notice is to be served upon the other
party, it has specifically so stated and we see
no compelling reason to read into the
provisions of Section 26(1) the requirement
of notice, when it is conspicuous by its very
absence. Once the proceedings before the
Commission are completed, the parties have a right
to appeal under Section 53-A(1)(a) in regard to the
orders termed as appealable under that provision.
Section 53-B requires that the Tribunal should give,
parties to the appeal, notice and an opportunity of
being heard before passing orders, as it may deem
fit and proper, confirming, modifying or setting
aside the direction, decision or order appealed
against.
In CCI Vs.Bharathi Airtel, it is held as follows:
116. We may mention at the outset that
in SAIL [CCI v. SAIL, (2010) 10 SCC 744] , nature
of the order passed by CCI under Section 26(1) of
the Competition Act [here also we are concerned
with an order which is passed under Section 26(1)
of the Competition Act] was gone into. The Court,
in no uncertain terms, held that such an order
would be an administrative order and not a
quasi-judicial order. It can be discerned from
paras 94, 97 and 98 of the said judgment,
which are as under: (SAIL case [CCI v. SAIL,
(2010) 10 SCC 744] , SCC pp. 785 & 787)
"94. The Tribunal, in the impugned judgment
[SAIL v. Jindal Steel & Power Ltd., 2010 SCC
OnLine Comp AT 5] , has taken the view that there
is a requirement to record reasons which can be
express, or, in any case, followed by necessary
implication and therefore, the authority is required
to record reasons for coming to the conclusion. The
proposition of law whether an administrative or
quasi-judicial body, particularly judicial courts,
should record reasons in support of their decisions
or orders is no more res integra and has been
settled by a recent judgment of this Court
in CCT v. Shukla & Bros. [CCT v. Shukla & Bros.,
(2010) 4 SCC 785 : (2010) 3 SCC (Civ) 725 :
(2010) 2 SCC (Cri) 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, requiring issuance of
direction for investigation to the Director
General. Such view should be recorded with
reference to the information furnished to the
Commission. Such opinion should be formed on the
basis of the records, including the information
furnished and reference made to the Commission
under the various provisions of the Act, as
aforereferred. However, other decisions and orders,
which are not directions simpliciter and determining
the rights of the parties, should be well reasoned
analysing and deciding the rival contentions raised
before the Commission by the parties. In other
words, the Commission is expected to express
prima facie view in terms of Section 26(1) of
the Act, without entering into any
adjudicatory or determinative process and by
recording minimum reasons substantiating
the formation of such opinion, while all its
other orders and decisions should be well
reasoned.
98. Such an approach can also be justified with
reference to Regulation 20(4), which requires the
Director General to record, in his report, findings
on each of the allegations made by a party in the
intimation or reference submitted to the
Commission and sent for investigation to the
Director General, as the case may be, together
with all evidence and documents collected during
investigation. The inevitable consequence is that
the Commission is similarly expected to write
appropriate reasons on every issue while passing
an order under Sections 26 to 28 of the Act."
117. There is no reason to take a contrary
view. Therefore, we are not inclined to refer the
matter to a larger Bench for reconsideration.
36. Thus, from the above authorities, it is clear that:
• An order under Section 26(1) of the Act passed by
the Commission is an 'administrative direction' to
one of its wings departmentally and without entering
upon any adjudicatory process; and
• Section 26(1) of the Act 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 information received by it.
Accordingly, Points A and B are answered.
Re: Point C:
37. The aspect that needs to be examined now, is
whether the Commission has acted in consonance with the
settled law.
38. As held in paragraph No. 71 of CCI Vs. SAIL, the
intimation received complaining of violation of the
provisions 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 Amazon has launched 45
mobile phones exclusively on their platforms. Commission
has recorded (in paragraph 23) that petitioners have their
own set of preferred sellers and there are only few online
sellers which sell the exclusively launched smart phones.
41. Commission has further recorded (in paragraph 23)
that based on the evidence adduced by the informant and
the information available in public domain, it has prima
facie inferred that there appears to be exclusive
partnership between smart phone manufacturers and e-
Commerce platforms for exclusive launch of smart phones.
42. The Commission has also recorded that it has taken
note of the emails dated 31.03.2019 and 20.09.2019 etc.,
allegedly sent by Flipkart and Amazon to their sellers
offering to incur a part of discounts offered during big sale
events. It has further recorded that certain smart phone
brands/models are available at significantly discounted
price on petitioners' platforms and are sold largely through
the sellers identified by informant as 'preferred sellers'.
With regard to the allegations such as funding of discount,
the Commission has opined that it is a matter that merits
investigation.
43. Adverting to preferential listing, the Commission
has noted that the allegations are inter-connected and
therefore, a holistic investigation is necessary.
44. The Commission has further noted (in paragraph
26) that the exclusive arrangements between smart phone
brands and e-Commerce platforms, demonstrated in the
information coupled with the allegations of linkage between
preferred sellers and the petitioners, merits investigation.
45. Thus, a plain reading of the impugned order shows
that Commission has looked into the information in detail
and applied its mind.
46. It was argued by Shri. Gopal Subramanium that on
the earlier occasions and particularly in the AIOVA case,
though the allegation was against Flipkart, in order to
understand the nuances of the trade, the Commission had
held preliminary conference with Amazon. In this case,
when Commission has taken a drastic decision to initiate an
inquiry, it has not chosen to issue notice to the petitioners.
47. As recorded hereinabove, the law on the point with
regard to the procedure to be followed at the stage of
26(1) of the Act has been declared by the Apex Court in
CCI Vs. SAIL and CCI Vs. Bharthi Airtel, holding that 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., reported in (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 at the same time, they do
not "blow hot and cold", but they blow hot and
hotter. ... "
50. The next contention urged by Shri. Gopal
Subramanium is, in CCI Vs. Bharathi Airtel, the Apex Court
has upheld the judgment of the High Court that the
Commission could exercise jurisdiction only after conclusion
of proceedings and TRAI returned its findings. He
submitted that in the instant case, Enforcement Directorate
is already investigating the matter. Therefore, CCI could
not have exercised its jurisdiction whilst investigation by
Enforcement Directorate is in progress.
51. In response, Smt. Madhavi Diwan rightly submitted
that TRAI is a sectoral regulator and in view of the issues
involved in CCI Vs. Bharathi Airtel, it has been held that
CCI could exercise its jurisdiction after TRAI returned its
findings. She contended that the Statement of objects and
reasons of FEMA aim at consolidating and amending the
law relating to Foreign exchange with the objective of
facilitating external trade and payments for promoting
orderly development and maintenance of Foreign Exchange
markets in India. The FDI policy issued under FEMA
specifies entry conditions for Foreign Companies in various
sectors. The FDI policy does not offer any immunity or
exemption from the law of the land. She submitted that the
Hon'ble Supreme Court of India in number of cases has
upheld parallel investigation/adjudication by different
Regulators/Agencies/ Adjudicators. She submitted that in
Securities Exchange Board of India Vs. Pan Asia Advisors
Limited and another, reported in (2015) 14 SCC 71
(paragraph No.92) it is held that SEBI can exercise its
powers while action is taken for violation under FEMA or
RBI Act. In S. Sukumar Vs. Secretary, Institute of
Chartered Accountants in India and Ors., reported in
(2018) 14 SCC 360 (paragraphs No.45 and 46) it is held
that Institute of Chartered Accountants, a statutory body
can investigate while ED and ROC investigations are in
progress.
52. Smt. Madhavi Diwan further submitted that the
Foreign Exchange Management Act is an earlier Act, and
Competition Act has come into force later. Section 60 of the
Competition Act provides that it shall have overriding
effect. Section 62 of the Act provides that the provisions of
Competition Act shall be in addition to, and not in
derogation of the provisions of any other law for the time
being in force.
53. With regard to investigation 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, reported in (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 merely protects the confidentiality of the information
belonging to any enterprise which has been obtained by or
on behalf of the Commission or the Appellate Tribunal and
the same cannot be disclosed otherwise than in compliance
with or for the purpose of this Act or any other law for the
time being in force. She further, rightly submitted that an
order under Section 26(1) cannot be described as being
outside the purposes of the Act and therefore, position is
not altered with regard to confidentiality. So far as the
aspect of business reputation is concerned, placing reliance
on Cadila Health Care Limited & Another Vs. Competition
Commission of India & Ors., reported in 2018 SCC OnLine
Del 11229 (paragraph No.44) she submitted that allowing
enquiry is akin to adjudicating a tax or commercial dispute
or regulatory dispute. The relevant passage reads as
under:
44. [....] Cadila's reliance on Rohtas Industries and
Barium Chemicals is, in the opinion of this court,
irrelevant given the facts of this case. Granted,
administrative orders should be reasoned; however,
where they trigger investigative processes that are
not conclusive, having regard to the clear
enunciation in SAIL, that notice is inessential,
accepting the argument, that inquiry would harm the
market or commercial reputation of a concern, would
be glossing over the law in SAIL. Moreover, the
Rohtas Industries related to the affairs of a
company, which implicated its internal management.
Allowing inquiry, even an innocuous one, without
application of mind, is a different proposition
altogether from acting on the information of
someone who alleges either direct or indirect or tacit
dominance in the market place in the course of one's
business. The latter is regulatory of the marketplace
rather than the core management of the concern; it
is akin to adjudicating a tax or commercial
dispute, or a regulatory dispute. As stated by
Justice Brennan, natural justice in such instances
should not ―unlock the gate which shuts the court
out of review on the merits." (in this case, preclude
or chill the exercise of jurisdiction by the DG into a
potential abuse of dominant position of a commercial
entity). Therefore, this court finds no merit in
the argument that the procedure adopted by
the DG in going ahead with the inquiry and
investigating into the market behaviour of
Cadila in anyway affects it so prejudicially as to
tarnish its 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, reported in
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, reported in 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 was undertaken as a
part of the 'Advocacy mandate' under Section 49 of the Act
and market study is in no manner inconsistent with the
impugned order.
58. Petitioners have pleaded in extenso and submitted
elaborate arguments on the merits of the matter. But, in a
writ petition filed under Article 226 of the Constitution of
India, seeking judicial review, the High Court can examine
only the decision making process with the exception
namely the cases involving violation of fundamental human
rights. The law on the point is fairly well settled. It may be
profitable to recall following opinion of Lord Greene in
Associated Provincial Picture Houses Ltd., Vs. Wednesbury
Corporation, reported in (1948) 1 KB 223:
"It is true that discretion must be exercised
reasonably. Now what does that mean? Lawyers
familiar with the phraseology used in relation to
exercise of statutory discretions often use the word
'unreasonable' in a rather comprehensive sense. It
has frequently been used and is frequently used as
a general description of the things that must not be
done. For instance, a person entrusted with a
discretion must, so to speak, direct himself
properly in law. He must call his own attention to
the matters which he is bound to consider. He must
exclude from his consideration matters which are
irrelevant to what he has to consider. If he does
not obey those rules, he may truly be said, and
often is said, to be acting 'unreasonably'. Similarly,
there may be something so absurd that no sensible
person could ever dream that it lay within the
powers of the authority. Warrington L.J.
in Short v. Poole Corporation [1926 Ch 66] gave
the example of the red-haired teacher, dismissed
because she had red hair. This is unreasonable in
one sense. In another it is taking into consideration
extraneous matters. It is so unreasonable that it
might almost be described as being done in bad
faith; and, in fact, all these things run into one
another."
59. In G. Veerappa Pillai, Proprietor, Sathi Vilas Bus
Service, Porayar, Tanjore District, Madras Vs. Raman and
Raman Limited, Kumbakonam, Tanjore District and Three
Others., reported in Air 1952 SC 192, it is held that writs
referred to in Article 226 are intended to enable the High
Court to issue them in grave cases where the subordinate
tribunals or bodies or officers act wholly without
jurisdiction, or in excess of it, or in violation of 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,
reported in 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 mere wrong decision. Quoting Morris J,
it is held as follows:
10. ............ "The essential features of the remedy by
way of certiorari have been stated with remarkable
brevity and clearness by Morris, L.J. in the recent
case of Rex v. Northumberland Compensation
Appellate Tribunal [(1952) 1 KB 338 at 357]. The
Lord Justice says:
"It is plain that certiorari will not issue as
the cloak of an appeal in disguise. It does
not lie in order to bring up an order or
decision for re-hearing of the issue raised
in the proceedings. It exists to correct error
of law when revealed on the face of an
order or decision or irregularity or absence
of or excess of jurisdiction when shown."
61. In G.B. Mahajan and others Vs. Jalgaon Municipal
Council and others, reported in (1991) 3 SCC 91 (para 44)
the Hon'ble Supreme Court of India speaking through
Justice M.N. Venkatachaliah (as he then was), referring to
Prof. Wade's comment on Wednesbury doctrine, has held
that the point to note is that a thing is not unreasonable in
the legal sense merely because Court thinks it unwise.
Prof. Wade's comment reads thus:
"This has become the most frequently cited
passage (though most commonly cited only by its
nickname) in administrative law. It explains how
'unreasonableness', in its classic formulation,
covers a multitude of sins. These various errors
commonly result from paying too much attention to
the mere words of the Act and too little to its
general scheme and purpose, and from the fallacy
that unrestricted language naturally confers
unfettered discretion.
Unreasonableness has thus become a generalised
rubric covering not only sheer absurdity or caprice,
but merging into illegitimate motives and purposes,
a wide category of errors commonly described as
'irrelevant considerations', and mistakes and
misunderstandings which can be classed as self-
misdirection, or addressing oneself to the wrong
question ...."
Further, following observations of Lord Scarman in
Nottinghamshire County Council Vs. Secretary of State for
Environment have also been quoted and they aptly apply to
these cases.
"... But I cannot accept that it is
constitutionally appropriate, save in very
exceptional circumstances, for the courts to
intervene on the ground of "unreasonableness" to
quash guidance framed by the Secretary of State
and by necessary implication 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?, reported in (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 administrative
discretion. After analyzing the law with regard to
Constitutional review in UK and the cases involving human
rights, he has stated that it is quite inappropriate to speak
of the decline or demise of Wednesbury test. He has
concluded that Wednesbury Principles are still alive as
follows:
"In the ultimate analysis, it can be said that
the Wednesbury principles are still alive and
applicable in judicial review of administrative
discretion where no constitutional/fundamental
rights are involved. Wednesbury, is but a facet
and an enduring facet of the larger landscape of
judicial review.
These issues and aspects are not a matter of
mere semantics but are the constitutional
underpinnings of the exercise of judicial power
and the limits thereof."
63. In the case on hand, the informant has filed
information and appended material papers, which according
to the informant support its allegations. It was submitted
by the learned Additional Solicitor General that the
Commission has also called upon the informant to file a
Certificate under Section 65B of the Indian Evidence Act
and the penalty for incorrect information is upto Rs. One
Crore under Section 44 of the Competition Act.
64. It is expected that an order directing investigation
be supported by 'some reasoning' (CCI Vs. SAIL para 97),
which the Commission has fulfilled. Therefore, it would be
unwise to prejudge the issues raised by the petitioners in
these writ petitions at this stage and scuttle the
investigation. Therefore, the impugned order does not call
for any interference. Accordingly, point (c) is answered.
65. Resultantly, these writ petitions must fail.
Accordingly, Rule is discharged and writ petitions stand
dismissed.
No costs."
14. This Court has carefully gone through the order
passed by the CCI dated 13.1.2020 and the order passed by the
learned Single Judge dated 11.6.2021, which are reproduced
supra.
15. The aim and object of the Act of 2002 as stated in
the Preamble of the Act of 2002 reads as under;
"An Act to provide, keeping in view of the economic
development of the country, for the establishment of a
Commission to prevent practices having adverse effect on
competition, to promote and sustain competition in markets,
to protect the interests of consumers and to ensure freedom
of trade carried on by other participants in markets, in India,
and for matters connected therewith or incidental thereto."
The Act of 2002 was enacted to curb anti competitive
practices and the CCI is given the task as a Regulator to ensure
that no such anti competitive practices are undertaken.
16. In the case of Rajasthan Cylinders and
Containers Ltd., v. Union of India, reported in (2020) 16 SCC
615, the Hon'ble Supreme Court in paragraph 73 has held as
under;
"73. It follows from the above that whereas on the one
hand the economic policy of the nation has ushered in the era
of liberalisation and globalisation thereby giving free play to
the private sector in the manner of conducting business, at
the same time, in public interest and in the interest of
consumers, a regime of regulators has also been brought to
ensure certain checks and balances. Since competition among
the enterprises or businessmen is treated as service for a
public purpose and, therefore, there is a need to curb anti-
competitive practices, CCI is given the task (as a regulator) to
ensure that no such anti-competitive practices are
undertaken. In fact, Section 18 of the Act casts a specific and
positive obligation on CCI to "eliminate" anti-competitive
practices and promote competition, interest of the consumer
and free trade."
17. In the considered opinion of this Court, the CCI
certainly have a jurisdiction to take appropriate steps to curb the
anti competitive practices and a detailed mechanism is provided
under the Act itself to ensure that no anti competitive practices
are undertaken. The appellants, it appears, do not want to
participate at all in the proceedings initiated by the CCI and do
not want the CCI to proceed ahead in accordance with law. This
Court really fails to understand as to why the appellants do not
want to participate in the enquiry, in which the appellants will
have an opportunity to produce the material before the Director
General on the basis of which, after hearing the appellants and
after following the due process of law, the Director General shall
be able to conduct an enquiry.
18. The Hon'ble Supreme Court in the case of Excel
Crop Care Ltd., v. CCI, reported in (2017) 8 SCC 47, has dealt
with the aim and object of Act of 2002 and paragraphs 21, 22,
23, 24, 25, 26, 27, 28 and 29 of the judgment read as under;
"21. In the instant case, we are concerned with the first type of
practices, namely, anti-competitive agreements. The Act, which
prohibits anti-competitive agreements, has a laudable purpose
behind it. It is to ensure that there is a healthy competition in
the market, as it brings about various benefits for the public at
large as well as economy of the nation. In fact, the ultimate
goal of competition policy (or for that matter, even the
consumer policies) is to enhance consumer well-being. These
policies are directed at ensuring that markets function
effectively. Competition policy towards the supply side of the
market aims to ensure that consumers have adequate and
affordable choices. Another purpose in curbing anti-competitive
agreements is to ensure "level playing field" for all market
players that helps markets to be competitive. It sets "rules of
the game" that protect the competition process itself, rather
than competitors in the market. In this way, the pursuit of fair
and effective competition can contribute to improvements in
economic efficiency, economic growth and development of
consumer welfare. How these benefits accrue is explained in the
ASEAN Regional Guidelines on Competition Policy, in the
following manner:
"2.2. Main Objectives and Benefits of Competition
Policy
***
2.2.1.1. Economic efficiency : Economic efficiency refers to
the effective use and allocation of the economy's resources.
Competition tends to bring about enhanced efficiency, in
both a static and a dynamic sense, by disciplining firms to
produce at the lowest possible cost and pass these cost
savings on to consumers, and motivating firms to undertake
research and development to meet customer needs.
2.2.1.2. Economic growth and development : Economic
growth--the increase in the value of goods and services
produced by an economy--is a key indicator of economic
development. Economic development refers to a broader
definition of an economy's well-being, including employment
growth, literacy and mortality rates and other measures of
quality of life. Competition may bring about greater
economic growth and development through improvements in
economic efficiency and the reduction of wastage in the
production of goods and services. The market is therefore
able to more rapidly reallocate resources, improve
productivity and attain a higher level of economic growth.
Over time, sustained economic growth tends to lead to an
enhanced quality of life and greater economic development.
2.2.1.3. Consumer Welfare : Competition policy contributes
to economic growth to the ultimate benefit of consumers, in
terms of better choice (new products), better quality and
lower prices. Consumer welfare protection may be required
in order to redress a perceived imbalance between the
market power of consumers and producers. The imbalance
between consumers and producers may stem from market
failures such as information asymmetries, the lack of
bargaining position towards producers and high transaction
costs. Competition policy may serve as a complement to
consumer protection policies to address such market
failures."
22. The aforesaid Guidelines also spell out few more benefits of
such laws incorporating competition policies by highlighting the
following advantages:
"2.2.2. In addition, competition policy is also beneficial to
developing countries. Due to worldwide deregulation,
privatisation and liberalisation of markets, developing
countries need a competition policy, in order to monitor and
control the growing role of the private sector in the economy
so as to ensure that public monopolies are not simply
replaced by private monopolies.
2.2.3. Besides contributing to trade and investment policies,
competition policy can accommodate other policy objectives
(both economic and social) such as the integration of
national markets and promotion of regional integration, the
promotion or protection of small businesses, the promotion
of technological advancement, the promotion of product and
process innovation, the promotion of industrial
diversification, environment protection, fighting inflation, job
creation, equal treatment of workers according to race and
gender or the promotion of welfare of particular consumer
groups.
In particular, competition policy may have a positive impact
on employment policies, reducing redundant employment
(which often results from inefficiencies generated by large
incumbents and from the fact that more dynamic enterprises
are prevented from entering the market) and favouring jobs
creation by new efficient competitors.
2.2.4. Competition policy complements trade policy,
industrial policy and regulatory reform. Competition policy
targets business conduct that limits market access and
which reduces actual and potential competition, while trade
and industrial policies encourage adjustment to the trade
and industrial structures in order to promote productivity-
based growth and regulatory reform eliminates domestic
regulation that restricts entry and exit in the markets.
Effective competition policy can also increase investor
confidence and prevent the benefits of trade from being lost
through anti-competitive practices. In this way, competition
policy can be an important factor in enhancing the
attractiveness of an economy to foreign direct investment,
and in maximising the benefits of foreign investment."
23. In fact, there is broad empirical evidence supporting the
proposition that competition is beneficial for the economy.
Economists agree that it has an important role to play in
improving productivity and, therefore, the growth prospects of
an economy. It is achieved in the following manner:
"International Competition Network -- Economic Growth and
Productivity
Competition contributes to increased productivity through:
Pressure on firms to control costs--In a competitive
environment, firms must constantly strive to lower their
production costs so that they can charge competitive prices,
and they must also improve their goods and services so that
they correspond to consumer demands.
Easy market entry and exit--Entry and exit of firms
reallocates resources from less to more efficient firms.
Overall productivity increases when an entrant is more
efficient than the average incumbent and when an existing
firm is less efficient than the average incumbent. Entry--and
the threat of entry--incentivises firms to continuously
improve in order not to lose market share to or be forced
out of the market by new entrants.
Encouraging innovation--Innovation acts as a strong driver
of economic growth through the introduction of new or
substantially improved products or services and the
development of new and improved processes that lower the
cost and increase the efficiency of production. Incentives to
innovate are affected by the degree and type of competition
in a market.
Pressure to improve infrastructure--Competition puts
pressure on communities to keep local producers
competitive by improving roads, bridges, docks, airports and
communications, as well as improving educational
opportunities.
Benchmarking--Competition also can contribute to increased
productivity by creating the possibility of benchmarking. The
productivity of a monopolist cannot be measured against
rivals in the same geographic market, but a dose of
competition quickly will expose inferior performance. A
monopolist may be content with mediocre productivity but a
firm battling in a competitive market cannot afford to fall
behind, especially if the investment community is
benchmarking it against its rivals."
24. Productivity is increased through competition by putting
pressure on firms to control costs as the producers strive to
lower their production costs so that they can charge competitive
prices. It also improves the quality of their goods and services
so that they correspond to consumers' demands.
25. Competition law enforcement deals with anti-competitive
practices arising from the acquisition or exercise of undue
market power by firms that result in consumer harm in the
forms of higher prices, lower quality, limited choices and lack of
innovation. Enforcement provides remedies to avoid situations
that will lead to decreased competition in markets. Effective
enforcement is important not only to sanction anti-competitive
conduct but also to deter future anti-competitive practices.
26. When we recognise that competition has number of
benefits, it clearly follows that cartels or anti-competitive
agreements cause harm to consumers by fixing prices, limiting
outputs or allocating markets. Effective enforcement against
such practices has direct visible effects in terms of reduced
prices in the market and this is also supported by various
empirical studies.
27. Keeping in view the aforesaid objectives that need to be
achieved, Indian Parliament enacted the Competition Act, 2002.
Need to have such a law became all the more important in the
wake of liberalisation and privatisation as it was found that the
law prevailing at that time, namely, Monopolies and Restrictive
Trade Practices Act, 1969 was not equipped adequately enough
to tackle the competition aspects of the Indian economy. The
law enforcement agencies, which include CCI and COMPAT, have
to ensure that these objectives are fulfilled by curbing anti-
competitive agreements.
28. Once the aforesaid purpose sought to be achieved is kept in
mind, and the same is applied to the facts of this case after
finding that the anti-competitive conduct of the appellants
continued after coming into force of provisions of Section 3 of
the Act as well, the argument predicated on retrospectivity
pales into insignificance.
29. One has to keep in mind the aforesaid objective which the
legislation in question attempts to subserve and the mischief
which it seeks to remedy. As pointed out above, Section 18 of
the Act casts an obligation on CCI to "eliminate" anti-
competitive practices and promote competition, interests of the
consumers and free trade. It was rightly pointed out by Mr
Neeraj Kishan Kaul, the learned Additional Solicitor General,
that the Act is clearly aimed at addressing the evils affecting the
economic landscape of the country in which interest of the
society and consumers at large is directly involved. This is so
eloquently emphasised by this Court in Competition Commission
of India v. SAIL [CCI v. SAIL, (2010) 10 SCC 744] in the
following manner : (SCC pp. 755-56 & 794, paras 6, 8-10 &
125)
"6. As far as the objectives of competition laws are
concerned, they vary from country to country and even
within a country they seem to change and evolve over the
time. However, it will be useful to refer to some of the
common objectives of competition law. The main objective
of competition law is to promote economic efficiency using
competition as one of the means of assisting the creation
of market responsive to consumer preferences. The
advantages of perfect competition are threefold : allocative
efficiency, which ensures the effective allocation of
resources, productive efficiency, which ensures that costs
of production are kept at a minimum and dynamic
efficiency, which promotes innovative practices. These
factors by and large have been accepted all over the world
as the guiding principles for effective implementation of
competition law.
***
8. The Bill sought to ensure fair competition in India by
prohibiting trade practices which cause appreciable
adverse effect on the competition in market within India
and for this purpose establishment of a quasi-judicial body
was considered essential. The other object was to curb the
negative aspects of competition through such a body,
namely, "the Competition Commission of India" (for short
"the Commission") which has the power to perform
different kinds of functions, including passing of interim
orders and even awarding compensation and imposing
penalty. The Director General appointed under Section
16(1) of the Act is a specialised investigating wing of the
Commission. In short, the establishment of the
Commission and enactment of the Act was aimed at
preventing practices having adverse effect on competition,
to protect the interest of the consumer and to ensure fair
trade carried out by other participants in the market in
India and for matters connected therewith or incidental
thereto.
9. The various provisions of the Act deal with the
establishment, powers and functions as well as discharge
of adjudicatory functions by the Commission. Under the
scheme of the Act, this Commission is vested with
inquisitorial, investigative, regulatory, adjudicatory and to
a limited extent even advisory jurisdiction. Vast powers
have been given to the Commission to deal with the
complaints or information leading to invocation of the
provisions of Sections 3 and 4 read with Section 19 of the
Act. In exercise of the powers vested in it under Section
64, the Commission has framed regulations called the
Competition Commission of India (General) Regulations,
2009 (for short "the Regulations").
10. The Act and the Regulations framed thereunder clearly
indicate the legislative intent of dealing with the matters
related to contravention of the Act, expeditiously and even
in a time-bound programme. Keeping in view the nature of
the controversies arising under the provisions of the Act
and larger public interest, the matters should be dealt with
and taken to the logical end of pronouncement of final
orders without any undue delay. In the event of delay, the
very purpose and object of the Act is likely to be frustrated
and the possibility of great damage to the open market
and resultantly, country's economy cannot be ruled out.
***
125. We have already noticed that the principal objects of
the Act, in terms of its Preamble and the Statement of
Objects and Reasons, are to eliminate practices having
adverse effect on the competition, to promote and sustain
competition in the market, to protect the interest of the
consumers and ensure freedom of trade carried on by the
participants in the market, in view of the economic
developments in the country. In other words, the Act
requires not only protection of free trade but also
protection of consumer interest. The delay in disposal of
cases, as well as undue continuation of interim restraint
orders, can adversely and prejudicially affect the free
economy of the country. Efforts to liberalise the Indian
economy to bring it on a par with the best of the
economies in this era of globalisation would be jeopardised
if time-bound schedule and, in any case, expeditious
disposal by the Commission is not adhered to. The scheme
of various provisions of the Act which we have already
referred to including Sections 26, 29, 30, 31, 53-B(5) and
53-T and Regulations 12, 15, 16, 22, 32, 48 and 31 clearly
show the legislative intent to ensure time-bound disposal
of such matters."
19. The Hon'ble Supreme Court has held that in order to
avoid anti-competitive agreements, which causes harm to
consumers by fixing the prices, limits outputs or allocating the
markets, the Indian Parliament has enacted Competition Act
2002. The competition law enforcement deals with anti-
competitive practices and in those circumstances, once the CCI
forms a prima facie opinion on receipt of a complaint which is
given under Section 26(1) of the Act of 2002, directs the
Director General to conduct an investigation, at that initial stage,
it cannot foresee and predict whether any violation of the Act
would be found upon investigation and what would be the nature
of violation revealed through investigation. If the investigation
process is to be restricted in the manner projected by the
appellants, it would defeat the very purpose of the Act, which is
to prevent practices having appreciable adverse effect on the
competition. Therefore, at this stage, in the considered opinion
of this Court, the issues and grounds raised in respect of anti-
competitive practices as argued by the learned counsel for the
appellants does not arise. The appellants are certainly entitled
for opportunity of hearing as provided under the Statute and the
present petitions/appeals are certainly premature.
20. The Hon'ble Supreme Court in the same case of
Excel Crop Care Ltd.,(supra), in paragraph 108 has held as
under;
"108. It is well settled that the Competition Act, 2002 is a
regulatory legislation enacted to maintain free market so that
the Adam Smith's concept of invincible hands operate
1nhindered in the background. [CCI v. SAIL, (2010) 10 SCC
744] Further, it is clear from the Statement of Objects and
Reasons that this law was foreseen as a tool against
concentration of unjust monopolistic powers at the hands of
private individuals which might be detrimental for freedom of
trade. Competition law in India aims to achieve highest
sustainable levels of economic growth, entrepreneurship,
employment, higher standards of living for citizens, protect
economic rights for just, equitable, inclusive and sustainable
economic and social development, promote economic
democracy, and support good governance by restricting rent
seeking practices. Therefore, an interpretation should be
provided which is in consonance with the aforesaid objectives."
21. In the light of the aforesaid, in order to achieve the
object of the Act of 2002, the question of interference does not
arise. The appellants do have a right to participate in the
proceedings and/or under an obligation to produce all the
material as desired during the enquiry by the Director General.
The appellants want to crush the proceedings at a preliminary
stage in a similar manner like quashing of FIR as prayed in a
petition filed under Section 482 of the Cr.PC. Earlier, almost in
every criminal case, petitions were filed for quashment of the
First Information Report (FIR) and in those circumstances, the
Hon'ble Supreme Court has laid down parameters for quashment
of the criminal proceedings/ FIR in the case of State of
Haryana and others v. Bhajan Lal and others, reported in
AIR 1992 SC 604. Similarly, in Revenue matters as well as in
case of violation of other Statutes on issuance of show cause
notices, the aggrieved persons started rushing to Courts and in
those circumstances, the Hon'ble Supreme Court in the case of
Union of India & Anr., vs. Kunisetty Satyanarayana,
reported in (2006) 12 SCC 28, has passed the following;
"13. It is well settled by a series of decisions of this
Court that ordinarily no writ lies against a charge sheet or
show-cause notice vide Executive Engineer, Bihar State
Housing Board vs. Ramesh Kumar Singh ( [1996] 1 SCC
327/JT [1995] 8 SC 331), Special Director vs. Mohd. Ghulam
Ghouse (AIR 2004 SC 1467), Ulagappa vs. Divisional
Commissioner, Mysore ( 2001(10) SCC 639), State of U.P. vs.
Brahm Datt Sharma (AIR 1987 SC 943) etc.
14. The reason why ordinarily a writ petition should
not be entertained against a mere show-cause notice or
charge-sheet is that at that stage the writ petition may be
held to be premature. A mere charge-sheet or show-cause
notice does not give rise to any cause of action, because it
does not amount to an adverse order which affects the rights
of any party unless the same has been issued by a person
having no jurisdiction to do so. It is quite possible that after
considering the reply to the show-cause notice or after
holding an enquiry the authority concerned may drop the
proceedings and/or hold that the charges are not established.
It is well settled that a writ lies when some right of any party
is infringed. A mere show-cause notice or charge-sheet does
not infringe the right of anyone. It is only when a final order
imposing some punishment or otherwise adversely affecting a
party is passed, that the said party can be said to have any
grievance.
15. Writ jurisdiction is discretionary jurisdiction and
hence such discretion under Article 226 should not ordinarily
be exercised by quashing a show-cause notice or charge
sheet.
16. No doubt, in some very rare and exceptional
cases the High Court can quash a charge-sheet or show-cause
notice if it is found to be wholly without jurisdiction or for
some other reason if it is wholly illegal. However, ordinarily
the High Court should not interfere in such a matter."
22. The Hon'ble Supreme Court in the aforesaid case has
held that unless and until the show cause notice is vague or has
been issued by an authority not competent to do so, interference
can be done in the matter. In the present case, the order
passed by the CCI directing an enquiry is the first stage of
initiating process under the CCI Act and the enquiry is yet to
commence. The appellants do not want to participate in the
enquiry for the reasons best known to them.
23. The present case is not a case where the mala
fides are alleged against the Regulator, nor there is any
jurisdictional infirmity. The order passed under Section 26(1) is
neither an adjudication, nor determinative, but merely an
inquisitorial, departmental proceedings in the nature of a
direction to the Director General to make an investigation. It is
neither a judicial nor a quasi judicial proceedings as held by the
Hon'ble Supreme Court in the case of CCI v. SAIL. Paragraphs
31, 38, 87 and 91 of the judgment reads as under;
"31. We would prefer to state our answers to the points of
law argued before us at the very threshold. Upon pervasive
analysis of the submissions made before us by the learned
counsel appearing for the parties, we would provide our
conclusions on the points noticed supra as follows:
(1) In terms of Section 53-A(1)(a) of the Act appeal shall lie
only against such directions, decisions or orders passed by the
Commission before the Tribunal which have been specifically
stated under the provisions of Section 53-A(1)(a). The orders,
which have not been specifically made appealable, cannot be
treated appealable by implication. For example, taking a prima
facie view and issuing a direction to the Director General for
investigation would not be an order appealable under Section
53-A.
(2) Neither any statutory duty is cast on the Commission to
issue notice or grant hearing, nor can any party claim, as a
matter of right, notice and/or hearing at the stage of formation
of opinion by the Commission, in terms of Section 26(1) of the
Act that a prima facie case exists for issuance of a direction to
the Director General to cause an investigation to be made into
the matter.
However, the Commission, being a statutory body exercising,
inter alia, regulatory jurisdiction, even at that stage, in its
discretion and in appropriate cases may call upon the party(s)
concerned to render required assistance or produce requisite
information, as per its directive. The Commission is expected to
form such prima facie view without entering upon any
adjudicatory or determinative process. The Commission is
entitled to form its opinion without any assistance from any
quarter or even with assistance of experts or others. The
Commission has the power in terms of Regulation 17(2) of the
Regulations to invite not only the information provider but even
"such other person" which would include all persons, even the
affected parties, as it may deem necessary. In that event it
shall be "preliminary conference", for whose conduct of business
the Commission is entitled to evolve its own procedure.
(3) The Commission, in cases where the inquiry has been
initiated by the Commission suo motu, shall be a necessary
party and in all other cases the Commission shall be a proper
party in the proceedings before the Competition Tribunal. The
presence of the Commission before the Tribunal would help in
complete adjudication and effective and expeditious disposal of
matters. Being an expert body, its views would be of
appropriate assistance to the Tribunal. Thus, the Commission in
the proceedings before the Tribunal would be a necessary or a
proper party, as the case may be.
(4) During an inquiry and where the Commission is satisfied
that the act is in contravention of the provisions stated in
Section 33 of the Act, it may issue an order temporarily
restraining the party from carrying on such act, until the
conclusion of such inquiry or until further orders without giving
notice to such party, where it deems it necessary. This power
has to be exercised by the Commission sparingly and under
compelling and exceptional circumstances. The Commission,
while recording a reasoned order inter alia should:
(a) record its satisfaction [which has to be of much higher
degree than formation of a prima facie view under Section
26(1) of the Act] in clear terms that an act in contravention
of the stated provisions has been committed and continues
to be committed or is about to be committed;
(b) it is necessary to issue order of restraint; and
(c) from the record before the Commission, it is apparent
that there is every likelihood of the party to the lis, suffering
irreparable and irretrievable damage or there is definite
apprehension that it would have adverse effect on
competition in the market.
The power under Section 33 of the Act to pass temporary
restraint order can only be exercised by the Commission when it
has formed prima facie opinion and directed investigation in
terms of Section 26(1) of the Act, as is evident from the
language of this provision read with Regulation 18(2) of the
Regulations.
(5) In consonance with the settled principles of administrative
jurisprudence, the Commission is expected to record at least
some reason even while forming a prima facie view. However,
while passing directions and orders dealing with the rights of
the parties in its adjudicatory and determinative capacity, it is
required of the Commission to pass speaking orders, upon due
application of mind, responding to all the contentions raised
before it by the rival parties.
38. In contradistinction, the direction under Section 26(1) after
formation of a prima facie opinion is a direction simpliciter to
cause an investigation into the matter. Issuance of such a
direction, at the face of it, is an administrative direction to one
of its own wings departmentally and is without entering upon
any adjudicatory process. It does not effectively determine any
right or obligation of the parties to the lis. Closure of the case
causes determination of rights and affects a party i.e. the
informant; resultantly, the said party has a right to appeal
against such closure of case under Section 26(2) of the Act. On
the other hand, mere direction for investigation to one of the
wings of the Commission is akin to a departmental proceeding
which does not entail civil consequences for any person,
particularly, in light of the strict confidentiality that is expected
to be maintained by the Commission in terms of Section 57 of
the Act and Regulation 35 of the Regulations.
87. Now, let us examine what kind of function the Commission
is called upon to discharge while forming an opinion under
Section 26(1) of the Act. At the face of it, this is an inquisitorial
and regulatory power. A Constitution Bench of this Court in
Krishna Swami v. Union of India [(1992) 4 SCC 605] explained
the expression "inquisitorial". The Court held that the
investigating power granted to the administrative agencies
normally is inquisitorial in nature. The scope of such
investigation has to be examined with reference to the statutory
powers. In that case the Court found that the proceedings,
before the High-Power Judicial Committee constituted, were
neither civil nor criminal but sui generis.
91. The jurisdiction of the Commission, to act under this
provision, does not contemplate any adjudicatory function. The
Commission is not expected to give notice to the parties i.e. the
informant or the affected parties and hear them at length,
before forming its opinion. The function is of a very preliminary
nature and in fact, in common parlance, it is a departmental
function. At that stage, it does not condemn any person and
therefore, application of audi alteram partem is not called for.
Formation of a prima facie opinion departmentally (the Director
General, being appointed by the Central Government to assist
the Commission, is one of the wings of the Commission itself)
does not amount to an adjudicatory function but is merely of
administrative nature. At best, it can direct the investigation to
be conducted and report to be submitted to the Commission
itself or close the case in terms of Section 26(2) of the Act,
which order itself is appealable before the Tribunal and only
after this stage, there is a specific right of notice and hearing
available to the aggrieved/affected party. Thus, keeping in mind
the nature of the functions required to be performed by the
Commission in terms of Section 26(1), we are of the considered
view that the right of notice or hearing is not contemplated
under the provisions of Section 26(1) of the Act."
24. Keeping in view Sections 19 and 26 of the Act of
2002, the order is certainly administrative in nature and has
been passed at a preliminary/preparatory stage.
25. Learned Senior counsel appearing for the
appellants have argued before this Court that they should have
been granted an opportunity of hearing by the CCI before
passing an order under Section 26 does not help the appellants
in any manner and the Statute does not provide for grant of an
opportunity of hearing before passing an order under Section 21
of the Act of 2002 and the order under Section 26(1) is passed
at the pre-enquiry stage, as held by the Hon'ble Supreme Court
in the case of CCI v. SAIL. The CCI is only required to see
whether a prima facie opinion exists or not while passing an
order under Section 26(1) of the Act of 2002. The order under
Section 26(1) of the Act of 2002 can be passed when there is
prima facie material to direct an enquiry and elaborate reasons
are not required, as the CCI is required to express only a
tentative view. In case, elaborate reasons are provided in the
order passed under Section 26(1), it will certainly prejudice the
case of the person against whom a complaint has been made
and therefore, the Statute has provided a safeguard for holding
an enquiry after an order is passed under Section 26(1) and the
Director General is certainly required to grant an opportunity of
hearing while holding an enquiry in the matter. Therefore, the
petitions filed by the appellants before the learned Single Judge
were certainly premature petitions and without permitting the
Director General of the CCI to look into various agreements
executed by the appellants with the other persons, the
appellants want this Court to hold that the appellants have not
committed breach of the statutory provisions as contained under
the Act of 2002. In the considered opinion of this Court, unless
and until a detailed enquiry is conducted by the CCI, the
question of giving a finding in respect of the violation of the
statutory provisions, does not arise.
26. The Hon'ble Supreme Court in the case of CCI
Vs. Bharthi Airtel Ltd., reported in (2019) 2 SCC 521, in
paragraph 121 has held as under;
"121. Once we hold that the order under Section 26(1) of
the Competition Act is administrative in nature and further
that it was merely a prima facie opinion directing the
Director General to carry the investigation, the High Court
would not be competent to adjudge the validity of such an
order on merits. The observations of the High Court giving
findings on merits, therefore, may not be appropriate."
The Hon'ble Supreme Court in the aforesaid case has
held that the order under Section 26(1) of the Act of 2002 is
administrative in nature and the High Court would not be
competent to adjudicate the validity of such an order on merits.
In the light of the aforesaid, the question of adjudicating the
validity of an order passed under Section 26(1) on merits does
not arise.
27. Keeping in view the law laid down by the Hon'ble
Supreme Court in the case of CCI v. SAIL, the order passed
under Section 26(1) does not set into motion an unstoppable
process that necessarily culminates into an adjudication against
the entity against whom an enquiry is initiated. In fact,
Section 26 of the Act of 2002 read as a whole, discloses a
comprehensively and thoughtfully construed, stepwise scheme
which contemplates not only a fair hearing to the concerned
parties at the appropriate stage, but it is characterized by an
inherent robustness by which the proceedings may culminate in
closure.
28. In the present case, earlier also there was an
information submitted against the appellants and the matter is
ended in closure (AIOVA case). The Director General after
conducting an enquiry recommended closure by submitting an
investigation report and the same was accepted by the CCI.
Therefore, the appellants should not feel shy in participating in
the enquiry, which is yet to commence by the Director general
and all the grounds raised by the appellants shall be available
before the Director General as well as before the CCI. The order
passed under Section 26(1) is only the starting point of the
process and the appellants want to crush the process at the
threshold and the CCI is not being permitted by the appellants to
proceed ahead in the matter.
29. Much has been argued before this Court by the
appellants stating that the informant was a sponsored person
and much has been said about a draft which was submitted
along with the information. The Scheme of the Act of 2002
allows any person and not just an aggrieved person to file an
information under Section 19 and even suo motu cognizance can
be taken in the matter and after the information is received, the
requirement is, whether a prima facie case exists or not. Hence,
at this stage, the question of granting of an opportunity as
vehemently argued before this Court does not arise. Once the
CCI based upon the material has arrived at a conclusion that the
matter warrants an investigation, the question of interference by
this Court does not arise as the enquiry is yet to take place for
determination of the issues involved.
30. The Hon'ble Supreme Court in the case of CCI v.
SAIL has held that the threshold requirement for establishing a
prima facie case under Section 26(1) is a low threshold and what
constitutes a prima facie case at the stage of Section 26(1) must
be gleaned from the stand point of setting the process into
motion and not from point of view of granting any interim
measure or adjudicating the matter.
31. In the light of the aforesaid, it is apparent from a
reading of the CCI order dated 13.1.2020 that the prima facie
case was in existence and keeping in view the prima facie case,
an enquiry has been ordered by passing an order under Section
26(1) of the Act of 2002 by the CCI. In the considered opinion
of this Court, the learned Single Judge was justified in holding
that the order passed by the CCI does not warrant an
interference.
32. In the considered opinion of this Court, the other
ground raised in respect of violation of Section 3 cannot be
looked into as various agreements executed by the appellants
with different parties, relevant material in respect violation of
Section 3 is yet to be produced before the Director General,
hence, the petitions/appeals are premature and there cannot be
an adjudication in respect of violation of Section 3 at this stage,
as argued by the learned counsel for the appellants.
33. The CCI has found out a prima facie case for
initiating the process and motion. The 'prima facie case' as
defined in the case of Management of the Bangalore Woollen
Cotton and Silk Mills Co. Ltd., v. B.Dasappa, reported in AIR
1960 SC 1352, reads as under;
"9. ........ A prima facie case does not mean a case proved
to the hilt but a case which can be said to be established if the
evidence which is led in support of the same were believed.
While determining whether a prima facie case had been made
out the relevant consideration is whether on the evidence led
it was possible to arrive at the conclusion in question and not
whether that was the only conclusion which could be arrived
at on that evidence."
In the aforesaid case, the Hon'ble Supreme Court has
placed reliance upon its earlier judgment delivered in the case of
Martin Burn Ltd., v. R.N.Banerjee, reported in (1958) SCR
514. Keeping in view the aforesaid definition of prima facie case
and after going through the material on record, this Court is of
the opinion that the CCI has rightly exercised its jurisdiction
based upon the prima facie information on receipt of a complaint
and therefore, in the considered opinion of this Court, the
quashment of the same does not arise.
34. Much has been argued by the learned Senior Counsel
appearing for the appellants on the issue of locus. The issue in
respect of locus stands concluded on account of the judgment
delivered by the Hon'ble Supreme Court in the case of Samir
Agarwal v. Competition Commission of India and others,
reported in (2021) 3 SCC 136 and paragraphs 17 and 20 of the
said judgment read as under;
"17. The 2009 Regulations also point in the same direction
inasmuch as Regulation 10, which has been set out
hereinabove, does not require the informant to state how he is
personally aggrieved by the contravention of the Act, but only
requires a statement of facts and details of the alleged
contravention to be set out in the information filed. Also,
Regulation 25 shows that public interest must be foremost in
the consideration of CCI when an application is made to it in
writing that a person or enterprise has substantial interest in
the outcome of the proceedings, and such person may therefore
be allowed to take part in the proceedings. What is also
extremely important is Regulation 35, by which CCI must
maintain confidentiality of the identity of an informant on a
request made to it in writing, so that such informant be free
from harassment by persons involved in contravening the Act.
20. It must immediately be pointed out that this provision of
the Advocates Act, 1961 is in the context of a particular
advocate being penalised for professional or other misconduct,
which concerned itself with an action in personam, unlike the
present case, which is concerned with an action in rem. In this
context, it is useful to refer to the judgment in A. Subash Babu
v. State of A.P. [A. Subash Babu v. State of A.P., (2011) 7 SCC
616 : (2011) 3 SCC (Civ) 851 : (2011) 3 SCC (Cri) 267] , in
which the expression "person aggrieved" in Section 198(1)(c) of
the Code of Criminal Procedure, 1973, when it came to an
offence punishable under Section 494 of the Penal Code, 1860
(being the offence of bigamy), was under consideration. It was
held that a "person aggrieved" need not only be the first wife,
but can also include a second "wife" who may complain of the
same. In so saying, the Court held: (SCC pp. 628-29, para 25)
"25. Even otherwise, as explained earlier, the second wife
suffers several legal wrongs and/or legal injuries when the
second marriage is treated as a nullity by the husband
arbitrarily, without recourse to the court or where a
declaration sought is granted by a competent court. The
expression "aggrieved person" denotes an elastic and an
elusive concept. It cannot be confined within the bounds of
a rigid, exact and comprehensive definition. Its scope and
meaning depends on diverse, variable factors such as the
content and intent of the statute of which the
contravention is alleged, the specific circumstances of the
case, the nature and extent of complainant's interest and
the nature and the extent of the prejudice or injury
suffered by the complainant. Section 494 does not restrict
the right of filing complaint to the first wife and there is no
reason to read the said section in a restricted manner as is
suggested by the learned counsel for the appellant.
Section 494 does not say that the complaint for
commission of offence under the said section can be filed
only by the wife living and not by the woman with whom
the subsequent marriage takes place during the lifetime of
the wife living and which marriage is void by reason of its
taking place during the life of such wife. The complaint can
also be filed by the person with whom the second marriage
takes place which is void by reason of its taking place
during the life of the first wife."
35. Initially the CCI Act, 2002, provided for receipt of a
complaint from 'any person, consumer or an association, or
trade association'. This expression was substituted with the
expression 'receipt of any information in such manner and', by
2007 Amendment and the substitution was not without
significance. As held by the Hon'ble Supreme Court the
proceedings under the Act are proceedings in rem which affect
the public interest and a complaint can be filed by such person
personally affected or not. The CCI Act also provides that the
CCI may enquire into any alleged contravention of the provisions
of the Act of 2002 on its own motion and even while exercising
suo motu powers the CCI may receive information from any
person and not merely from a person, who is aggrieved by the
conduct that is alleged to have occurred.
36. Regulation 10 of the Regulations 2009 also provides
that the informant is not required to state as to how he is
personally aggrieved by the contravention of the Act, but only
requires a statement of facts and details of the alleged
contravention to be set out in the information filed. Therefore,
in the considered opinion of this Court, the CCI was justified in
directing an enquiry based upon the complaint made by
respondent No.2 in the matter for forming a prima facie opinion.
The order passed under Section 26(1) of the Act of 2002 is an
administrative order and no adjudication has been done at this
stage and therefore, in the considered opinion of this Court, the
question of interference as prayed by the learned counsel for the
appellants does not arise.
37. The issue relating to deep discounting, preferential
listing and exclusive tie-ups will be looked into in depth at the
time of enquiry by the Director General only when various
agreements executed by the appellants are brought to the notice
of the Director General. At this stage, the petitions/appeals filed
are premature and deserves to be dismissed. The learned Single
Judge was justified in holding that the order passed by the CCI
under Section 26(1) is an administrative order and the findings
arrived at by the learned Single Judge does not warrant an
interference.
38. Much has been argued on the ground of principles of
natural justice and fair play. The statutory provisions governing
the field do not provide for grant of opportunity while passing an
order under Section 26(1) of the Act of 2002. As already stated
earlier, the order passed under Section 26(1) is neither an
adjudication, nor administrative, but merely an inquisitorial,
departmental proceedings in the nature of a direction to the
Director General to make an investigation. It is neither a judicial
nor quasi judicial proceedings as held by the Hon'ble Supreme
Court in the case of CCI v. SAIL (supra). The order is purely
administrative in nature. It is passed at a
preliminary/preparatory stage and it is passed at a pre-enquiry
stage as held by the Hon'ble Supreme Court in the case of CCI v.
SAIL (supra). Paragraph 21 of the judgment reads as under;
"21. The informant i.e. the person who wishes to complain to
the Commission constituted under Section 7 of the Act, would
make such information available in writing to the Commission.
Of course, such information could also be received from the
Central Government, the State Government, statutory authority
or on its own knowledge as provided under Section 19(1)(a) of
the Act. When such information is received, the Commission is
expected to satisfy itself and express its opinion that a prima
facie case exists, from the record produced before it and then to
pass a direction to the Director General to cause an
investigation to be made into the matter. This direction,
normally, could be issued by the Commission with or without
assistance from other quarters including experts of eminence.
The provisions of Section 19 do not suggest that any notice is
required to be given to the informant, affected party or any
other person at that stage. Such parties cannot claim the right
to notice or hearing but it is always open to the Commission to
call any "such person", for rendering assistance or produce such
records, as the Commission may consider appropriate."
In the considered opinion of this Court, merely because an
opportunity of hearing was not given to the appellants, it does
not vitiate the order passed by the CCI.
39. Learned Senior counsel for the appellants have also
placed reliance upon a judgment delivered by the Delhi High
Court in the case of Google Inc v. CCI, reported in 2015 (150)
DRJ 192. The limited question before the High Court in the
aforesaid case was whether there exists a power to recall/review
notwithstanding the repeal of Section 37 of the Act of 2002,
which specifically provides for a power of review and the learned
Single Judge of Delhi High Court had no occasion to pass
sweeping observations in respect of the powers of Director
General, that too, in a manner which is significant departure
from the binding judgment of the Hon'ble Supreme Court in the
case of CCI v. SAIL (supra). The Hon'ble Supreme Court has in
detail gone through Section 26 of the Act of 2002 and by no
stretch of imagination the law laid down by the Hon'ble Supreme
Court can be diluted by a judgment of a High Court. The
judgment delivered in the case of Bharti Airtel Ltd (supra) is
also not applicable in the peculiar facts and circumstances of the
case.
40. We are dealing with a limited issue relating to an
order passed under Section 26(1) of the Act of 2002 by the CCI
setting the machinery in motion for conducting an enquiry by the
Director General and therefore, as the enquiry is yet to
commence, wherein all grounds raised in the present
petitions/appeals can be looked into, hence, the present
petitions/appeals are premature.
41. Learned Senior counsel appearing for the appellants
have also argued before this Court that earlier also a similar
issue has been looked into by the CCI in the case of AIOVA v.
Flipkart, in case No.20/2018, in which the CCI vide order dated
6.11.2018, directed closure of the case under Section 26(2) of
the Act of 2002. An appeal was preferred before the NCLAT and
the same was allowed by an order dated 4.3.2020 and the order
of the NCLAT was challenged by the Flipkart before the Hon'ble
Supreme Court and the same has been stayed by the Hon'ble
Supreme Court on 2.12.2020.
42. In the considered opinion of this Court, the order
passed in the case of AIOVA does not help the present
appellants. The order was passed by the CCI on 6.11.2018
directing closure of the case under Section 26(2) of the Act of
2002. The present order has been passed by the CCI under
Section 26(1) of the Act of 2002 on 13.1.2021, meaning thereby
after a lapse of considerable long time it has been passed and in
a competitive market various agreements are executed, new
practices are adopted every day and merely because some other
issue has been looked into by the CCI earlier, it does not mean
that on the ground of res judicata the CCI cannot look into any
information subsequently against the appellants. The principle
of res judicata has no application in the matter under the Act of
2002 in the peculiar facts and circumstances of the case. The
market place is by its very nature a constantly evolving and
dynamic space. The market forces can evolve even in the course
of a few months and therefore, by no stretch of imagination, it
can be held that the appellants should be out of bound for all
times and no action can be taken against them only because at
some point of time the matter has been looked into by the CCI.
43. In the case of Cadila Healthcare v. CCI, reported
in (2018) 252 DLT 647, the Hon'ble Supreme Court has held as
under;
"59. The last point on this issue is the question of res judicata.
Here, the court notices that Grasim Industries was a case where
the court had ruled that even though there might be an
infirmity in the CCI's approach regarding the initiation of
proceedings, the material gathered by DG can be treated as
information. Therefore, that in a given case, a decision is
rendered may not be conclusive of the matter in entirety;
complaints and grievances regarding abuse of dominance have
an inherently anti-competitive effect, which pervade the
marketplace and tend to stifle competition or create barriers to
a free trade in goods and services. Conclusions of one or two
specific complaints may not always be determinative of an
entity's behaviour in the market place; they tend to cover a
larger canvas, influencing the outcomes in terms of price,
access to articles goods and services, within the commercial
stream and their deleterious effects are felt by the general
public. Settlement or disposal of individual or some cases might
not be determinative of the matter which pertains to abuse of
dominance, for the reason that it affects the wider public, just
as a crime does. It is like saying that a builder or other service
provider who indulges in widespread malpractice that amounts
to cheating investors or flat buyers, which is exposed by one
complaint, that results in a first information report (FIR) and
consequent investigation, that unearths that several other
consumers are like preys can be quashed on the ground that
the errant service provider settles with the
complainant/informant. In such event, the High Court would
never exercise its discretion to quash the proceeding emanating
from the FIR. Therefore, the CCI or an expert body should
ordinarily not be crippled or hamstrung in their efforts by
application of technical rules of procedure."
44. In the considered opinion of this Court, an expert
body cannot be crippled or hamstrung in their efforts by
application of technical rules of procedure.
45. It is also contended by the learned Senior counsel
appearing for the appellants that the harm is going to be caused
to the business reputation of the appellants and before passing
an order under Section 26(1) of the Act of 2002, the appellants
should have been invited for a discussion.
46. In Cadila Healthcare's case (supra), the Hon'ble
Supreme Court in paragraph 44 has held as under;
44. ........ Cadila's reliance on Rohtas Industries and
Barium Chemicals is, in the opinion of this court, irrelevant
given the facts of this case. Granted, administrative orders
should be reasoned; however, where they trigger investigative
processes that are not conclusive, having regard to the clear
enunciation in SAIL, that notice is inessential, accepting the
argument, that inquiry would harm the market or commercial
reputation of a concern, would be glossing over the law in SAIL.
Moreover, the Rohtas Industries related to the affairs of a
company, which implicated its internal management. Allowing
inquiry, even an innocuous one, without application of mind, is
a different proposition altogether from acting on the information
of someone who alleges either direct or indirect or tacit
dominance in the market place in the course of one's business.
The latter is regulatory of the marketplace rather than the core
management of the concern; it is akin to adjudicating a tax or
commercial dispute, or a regulatory dispute. As stated by
Justice Brennan, natural justice in such instances should not
―unlock the gate which shuts the court out of review on the
merits." (in this case, preclude or chill the exercise of
jurisdiction by the DG into a potential abuse of dominant
position of a commercial entity). Therefore, this court finds no
merit in the argument that the procedure adopted by the DG in
going ahead with the inquiry and investigating into the market
behaviour of Cadila in anyway affects it so prejudicially as to
tarnish its 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."
In light of the aforesaid, it can be safely gathered that by
no stretch of imagination the order passed by the CCI under
Section 26(1) is going to cause harm to the business reputation
of the appellants.
47. In the light of the aforesaid, in the considered
opinion of this Court, by no stretch of imagination, the process of
enquiry can be crushed at this stage. In case, the appellants are
not at all involved in violation of any statutory provisions of Act
of 2002, they should not feel shy in facing an enquiry. On the
contrary, they should welcome such an enquiry by the CCI. The
writ petitions filed against the order dated 13.1.2021 and the
present writ appeals are nothing but an attempt to ensure that
the action initiated by the CCI under the Act of 2002 does not
attain finality and the same is impermissible in law as the Act of
2002 itself provides the entire mechanism of holding an enquiry,
granting an opportunity of hearing, passing of a final order as
well as appeal against the order passed by the CCI. In the
considered opinion of this Court, the present writ appeals filed by
the appellants are devoid of merits and substance, hence,
deserve to be dismissed and are accordingly, dismissed.
No order as to costs.
Pending, IAs if any, stand dismissed.
Sd/-
JUDGE
Sd/-
JUDGE
nd
