Giants Amazon and Flipkart face trouble over allegations of favoring selected sellers

The Indian e-commerce landscape, dominated by giants Amazon and Walmart-backed Flipkart, has long been under scrutiny by the Competition Commission of India (CCI) for alleged anti-competitive practices. From deep discounts and supplier bias to high margins, the policies of these platforms have often been criticized by both regulators and smaller retailers.

According to sources, Amazon employees and seller partners recently withdrew from communication groups on messaging platforms. In these groups, which facilitated informal discussions between seller partners and vendors, Amazon was often directly involved in business relationships.

“Legally, Amazon is not allowed to participate in discussions about orders, margins or discounts. However, the company does unofficially pursue such activities,” said a source familiar with the matter.

The timing of this exit coincided with the publication of a report by Reuterswhich highlighted Amazon and Flipkart’s violations of Indian antitrust laws.

According to the report, Amazon and Flipkart were found guilty in an Indian antitrust investigation of favoring select sellers on their platforms. The CCI, in a 2020 investigation, investigated allegations that these companies gave preferential treatment to certain sellers with whom they had business relationships, allowing those sellers to dominate search results and eliminate competitors.

The findings are documented in two detailed reports – 1,027 pages on Amazon and 1,696 pages on Flipkart – both dated August 9. These reports confirm that the e-commerce giants have created an ecosystem in which preferred sellers enjoy a disproportionate advantage.

“Each of the alleged anti-competitive practices was investigated and found to be true,” say both reports, which are not public and were prepared by Reuters for the first time.

The two companies will now review the report and raise any objections before CCI staff decide on possible fines.

The investigation’s findings are the latest setback for Amazon and Flipkart in a country where both companies are already under pressure and facing backlash from small retailers who accuse them of destroying local businesses through aggressive discounting strategies.

Recently, a small retailer’s post on LinkedIn made headlines, accusing Amazon of placing fake orders and then returning them to create the appearance of sales for smaller sellers.

An analyst who wished to remain anonymous commented on the situation, pointing out that while companies like Amazon and Flipkart are legally barred from engaging in direct seller discussions, these practices continue to go unnoticed through third-party intermediaries. “They have moved to partnering with e-commerce vendors who bring sellers on board and manage inventory. But fundamentally, not much has changed,” he said.

Amazon faces similar questions in the US and European markets.

Given the news reports, both companies could face stricter regulations in the future. “For Amazon and Flipkart, this could be a turning point. They will have to rethink their business practices if they want to compete in India’s fast-growing e-commerce market,” he concluded.

The CCI’s decision is being watched closely as it has the potential to redefine the way e-commerce works in India, where the lines between fair competition and dominance are becoming increasingly blurred.

Amazon and Flipkart did not respond to Business today‘s inquiries at the time of filing this report.