How Amazon and Flipkart flouted anti-trust laws, crushed small businesses

Amazon, ecommerce
An investigation by the Competition Commission of India has found that e-commerce biggies Amazon and Flipkart engaged in practices that squeezed out smaller businesses.

E-commerce giants Amazon and Flipkart have been charged with violation of antitrust laws after a four-year investigation by the Competition Commission of India. A report detailing these findings is expected to be shared soon with involved parties, including the informant and the companies, followed by a CCI hearing.

Since 2019, US-based Amazon, and Flipkart, majority owned by Walmart, have faced increased scrutiny following a complaint by the Delhi Vyapar Mahasangh, which alleged that their monopolistic behaviour has severely impacted smaller, domestic businesses. Leveraging their substantial financial resources, Amazon and Flipkart have offered heavy discounts to consumers, resulting in the shutdown of thousands of SMEs. The investigation found that these firms not only provided deep discounts on online smartphone sales but also engaged in selective seller partnerships. Commonly associated with Amazon are allegations of predatory pricing and exclusive partnerships.

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Amazon and the price of convenience 

In response, the Confederation of All India Traders urged the CCI to address the long-standing case of alleged anti-competitive practices. Consequently, on January 13, 2020, the CCI initiated an investigation under Section 26(1) of the Competition Act, 2002. It specifically targeted Amazon for certain practices, especially with Cloudtail and other in-house sellers. Similarly, Flipkart has been investigated for its links to platform sellers, which contravenes new e-commerce regulations.

The Everything War, a recent book by Dana Mattioli, reveals instances where Amazon reportedly exploited its platform by accessing sensitive data from successful third-party sellers to launch competing products under its own brand. This behaviour not only highlights the blurred lines between different business functions within Amazon but also reflects a significant conflict of interest that threatens fair market competition. Such tactics echo the monopolistic practices of historical giants like Standard Oil, suggesting that despite the technological advancements of the digital age, the underlying issues of market dominance remain.

Globally, governments are striving to regulate the expanding e-commerce sector amid concerns that overly stringent norms could hinder innovation. The Madras High Court expressed difficulties in defining the e-commerce space and substantiating anti-competitive allegations in such a dynamic sector with multiple players.

E-commerce scrutiny is not limited to India. Amazon faces investigations in the United States, and European regulators have also noted improper practices, although Amazon has settled these issues in Europe. A forthcoming trial in California in 2026 highlights further challenges for Amazon, described by the USA’s Federal Trade Commission as a monopolistic entity in the “online superstore market” and “online marketplace services.”

A global battleground

Amazon is accused of imposing hefty fees on sellers and using extensive web-crawling technologies to penalize them for offering lower prices on other websites. Amazon’s strategy involves making sellers reliant on its services, generating billions in annual revenue. It is likely that similar tactics are employed in other markets. Currently, Amazon controls approximately 40% of the US e-commerce sector.

The CCI probe could mark a turning point for India’s e-commerce landscape, potentially leading to severe penalties for these giants. India is rapidly becoming one of the largest global e-commerce markets, projected to surpass the US as the world’s second-largest online shopping destination within two years, second only to China. This growth, driven by India’s rising middle class, could propel the e-tail market to reach $150-$170 billion annually by 2027, according to a Bain & Company study.

Both domestic and international players are competing for market dominance, often resorting to unfair practices. The CCI’s findings suggest that fair regulations could ensure the sector’s prosperity, benefiting both consumers and small businesses. Ideally, the competition watchdog should mitigate deep discounts and predatory pricing by reinforcing antitrust laws and enhancing scrutiny of mergers and acquisitions.

Mattioli’s book draws a stark picture of the escalating costs for sellers using Amazon’s platform, where the company’s cut of seller revenues has dramatically increased. This is forcing sellers to raise their prices, thereby questioning the traditional antitrust focus solely on consumer welfare and efficiency. It brings to light the complex dynamics of modern e-commerce, where dominant players can manipulate both market conditions and regulatory frameworks to their advantage. These insights are crucial for understanding the broader implications of Amazon’s strategies on market structures and the necessity for a robust antitrust response that goes beyond traditional measures.

As companies like Amazon continue to expand, and with antitrust authorities worldwide cautioning about AI’s potential to further Big Tech’s dominance, it is crucial for policymakers to implement stronger antitrust measures. Substantial penalties, restricted market access, and outright bans might be necessary. Breaking the monopoly cycle requires governmental support for sellers to expand beyond physical stores. Experts also recommend revitalizing and adapting businesses for e-commerce success. Educating small business owners about these opportunities is essential.