The Competition Commission of India (CCI) has launched an investigation on Amazon and Walmart backed Flipkart over alleged violations of competition law.

The CCI passed directions on Monday for investigation under Section 26(1) of the Competition Act, 2002.

The order comes after a complaint was filed by a traders’ group representing small and medium businesses- Delhi Vyapar Mahasangh. These traders levelled several allegations of violations of FDI in e-commerce including that the ‘preferred sellers’  were affiliated with or were controlled by these e-commerce giants themselves, either directly or indirectly.

In the 11-page order, the CCI observed that special arrangements between smartphone/mobile phone brands and e-commerce platform/select sellers selling exclusively on either of the platforms, coupled with the allegation of linkages between these preferred sellers and e-commerce companies merits an investigation.

“Exclusive launch (of mobile phones) 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,” the order said.

The CCI asked its unit working on the case to complete its probe within 60 days, but usually such matters take much more time.

“It needs to be investigated whether the alleged exclusive arrangements, deep-discounting and preferential listing by the opposite parties (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,” the order said.

“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,” it added.

Meanwhile, a Reuters report suggested that both, Flipkart and Amazon are compliant with the laws.

“Flipkart is ‘fully compliant’ with all laws and is currently reviewing the CCI order,” Senior Vice President Rajneesh Kumar was quoted as saying by Reuters.

The same report quoted Amazon as saying, “We welcome the opportunity to address allegations made about Amazon; we are confident in our compliance, and will cooperate fully with the CCI.”

CCI’s probe comes at a time when Amazon chief is expected to visit India later this week, for potential meetings with government officials.

(With input from agencies)