An investigation by Indian antitrust authorities has determined that Amazon, the U.S. e-commerce leader, and Flipkart, owned by Walmart, have breached local competition regulations by favoring certain sellers on their platforms, as reported by Reuters.

The Competition Commission of India (CCI) initiated the inquiry in 2020, alleging that both companies were promoting specific sellers with whom they had business relationships, thereby prioritizing certain product listings.

In a comprehensive 1,027-page report on Amazon and a 1,696-page report on Flipkart, both released on August 9, CCI investigators concluded that the companies had established a system that elevated preferred sellers in search results, marginalizing other vendors.

The reports stated, “Each of the anti-competitive practices alleged … were investigated and found to be true,” and noted that “ordinary sellers remained as mere database entries.”

Neither Amazon nor Flipkart, nor the CCI, responded immediately to inquiries from Reuters. Both companies have previously denied any wrongdoing, asserting that their operations comply with Indian regulations.

They will now assess the findings and may submit objections before the CCI considers any potential penalties.

This investigation represents another challenge for Amazon and Flipkart in India, where they have faced ongoing criticism from smaller retailers who claim that their businesses have been adversely affected by the significant discounts available online.

The inquiry was prompted by a complaint from the Delhi Vyapar Mahasangh, affiliated with the Confederation of All India Traders (CAIT), which represents 80 million retailers. CAIT expressed its approval of the CCI's findings and indicated plans to further engage with the federal government regarding the issue.

Amazon and Flipkart are prominent leaders in India's e-commerce sector, which was valued at approximately $57-60 billion in 2023 and is projected to exceed $160 billion by 2028, according to estimates from consultancy firm Bain.

In the United States, the Federal Trade Commission has filed a lawsuit against Amazon, claiming that the company employs "anticompetitive and unfair strategies to unlawfully sustain its monopoly."

Amazon has countered that the FTC's lawsuit is misguided and would ultimately harm consumers by resulting in increased prices and delayed deliveries.

In India, investigators conducted raids on certain Amazon and Flipkart sellers as part of an inquiry that followed a 2021 Reuters investigation.

This investigation, based on internal Amazon documents, revealed that the company had provided preferential treatment to a select group of sellers for years, allowing them to circumvent Indian regulations.

Although Amazon has denied any misconduct, the Competition Commission of India (CCI) previously informed an Indian court that the Reuters report supported its evidence against the company.

The CCI's findings indicated that favored sellers on Amazon's platform received advantages in online listings, drawing customer attention to their products during searches.

The practice of preferential listings and aggressive discounting, particularly in mobile phone sales—including pricing below cost—has a "catastrophic impact on existing market competition."

The CCI's report on Flipkart noted that preferred sellers were offered various services, such as marketing and delivery, at minimal costs.

Additionally, Flipkart enabled these sellers to offer significant discounts on phones, which the CCI described as "predatory pricing" that stifles competition.

Both reports concluded that these anti-competitive practices extend beyond mobile phone sales and are prevalent across other product categories.

For several months, Flipkart and Amazon attempted to obstruct the investigation through legal challenges, but the Supreme Court ultimately intervened.

For several months, Flipkart and Amazon attempted to impede the investigation through legal challenges in the judicial system. However, in 2021, the Supreme Court authorized the investigation to proceed.

Last month, India’s Minister of Commerce publicly criticized Amazon, stating that the company’s investments were frequently utilized to offset its business losses.

In June of last year, Amazon announced its intention to increase its Indian investment to $26 billion by 2030, encompassing its cloud business. Additionally, the company has set a target of $20 billion in merchandise exports from India by 2025.