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Section 26(1) OF Competiton Commission Act in the nature of an ‘administrative direction’ : High Court of Karnataka at Bengaluru

KARNATAKA HC  The question as to whether order issued under Section 26(1) of the Competition Act, 2002  directing the Director General to investigate certain alleged anti-competitive practices , was examined by the HIGH COURT OF KARNATAKA AT BENGALURU , consisting of Justice P.S  Dinesh Kumar in the matter of Amazon Seller Services Private Ltd vs. Competition Commission of India and ors. [ IN W.P. NO.3363 OF 2020 ], on 11.6.21.

The facts of the case were that Amazon and flipkart are two private limited companies against whom the Competition Commission of India via the Delhi Vyapar Mahasangh directed investigation relating to anti-competitive agreements and abuse of dominance.  The appellant  has filed information alleging contravention of Section 3(1) read with Section 3(4) and Section 4(1) and 4(2) of the Competition Act and sought directions for investigation under Section 26(1) of the Competition Act. Upon consideration of the said information, Commission has passed the impugned order.

The learned counsel for the appellant contended that the factual verments made by Amazon cannot be gone into writ petition and there is a need for investigation. The averments such as ‘ fulfilled by amazon’ , ‘amazon business model’ , ‘ market services are not discriminatory’ , etc are needed to be investigated. The counsel also contended that exclusive agreements and deep discounting can raise potential competition concern  and can thwart competition by entering into exclusive contract which amazon has done with many mobile phone manufacturers. The issues relating to Exclusive agreement, preferred sellers, deep discounting  can have adverse effect and therefore needs investigation.

The learned counsel for the respondent contended that alleged that the facts about 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. 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.

The court held that  Section 26(1) order is in the nature of an ‘administrative direction’ by the CCI to one of its departments and is passed without entering upon any adjudicatory process. It relied on the judgments of  SAIL Decision case and Airtel Decision case  and held that the CCI is not mandatorily required to issue notice, or provide a hearing, to any party prior to forming its prima facie opinion for the purposes on Section 26(1) of the Competition Act. Finally, the court also considered whether the CCI Order “calls for interference” and observed that at the stage of initiating an investigation, the CCI is required to form an opinion as to the existence of a prima facie case, and “a plain reading of the impugned order shows that the Commission has looked into the information in detail and applied its mind”. The Karnataka High Court dismissed the writ petitions while holding that it would be unwise to prejudge the issues at this stage and scuttle the CCI’s investigation based  limited grounds for judicial review under Article 226 of the Indian Constitution.

By Reetasa Samal

 

 

 

 

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