IP Connect

Tussle of e-Tailers: Westland drags Flipkart to Court

The Recent Fiasco

In a recent battle between Amazon and Flipkart, Westland Ltd. (the Tata Group-owned publisher of the `Scion of Ikshvaku’- hereinafter referred to as the Plaintiff) has dragged Flipkart to Delhi High Court, alleging Copyright and IT (Information Technology) Act violation with reference to its tie-up with Amazon for exclusive online sale of Amish Tripathi’s ‘Scion of Ikshvaku’.

The Plaintiff has stated that it had entered into a two-month exclusive deal with Amazon to sell the aforesaid book through its online platform. However, the Plaintiff claimed that Flipkart is selling the impugned book on its website which attracted the provisions relating to Copyright infringement and violations under the Information Technology Act.

The matter at present is sub judice before the Delhi High Court and in its last hearing on June 30, the Court has not made any restraint order against Flipkart and has granted two weeks’ time to Flipkart for filing their Written Statements in the case.

Ghost from the Past

This is not the first time that such a suit has emanated before the Court. A similar dispute between Flipkart and Amazon had emerged in 2014, wherein exclusive sale agreement was entered between Flipkart and Rupa Publications for the online sale of Chetan Bhagat’s Half Girlfriend. In the case of Mr. Mohit Manglani v. M/s Flipkart India Private Ltd. and Ors. (C. No.80 of 2014), Mohit Manglani had by referring to the exclusive sale agreement between Rupa Publications and Flipkart for sale of the book Half Girlfriend, alleged such practices as restrictive and unfair trade practices by e-portals. However, the CCI (Competition Commission of India) ruled in favour of the e-commerce and stated that such exclusive selling agreements do not violate the appreciable adverse effect on competition (AAEC), a requirement for alleging unfair trade practices under the Competition Act, 2002. The Commission further remarked that “It does not seem that such arrangements create any entry barrier for new entrants. It seems very unlikely that an exclusive arrangement between a manufacturer and an e-portal will create any entry barrier as most of the products which are illustrated in the information to be sold through exclusive e-partners (OPs) face competitive constraints,”

Exclusive Selling Agreements and the Competition Act, 2002

In the light of the recent case, it would be relevant to look into the provisions of the Competition Act, 2002, which defines Exclusive Supply Agreement as “any agreement restricting in any manner the purchaser in the course of his trade from acquiring or otherwise dealing in any goods other than those of the seller or any other person”.

According to the Act, exclusive supply agreements under Section 3 are prevented, if the following pre-requisites are satisfied.

i.                    That the enterprise is in a dominant position;

ii.                  If it is in a dominant position then it has abused its dominant position;

iii.                That the exclusive supply agreement will have an appreciable adverse effect on competition (AAEC) within India;

The Act under Section 19(3) further enunciates that the Commission shall determining whether an   agreement has an appreciable adverse effect on competition (AAEC) shall have due regard to all or any of the following factors, namely:

a) Creation of barriers to new entrants in the market;

b) Driving existing competitors out of the market;

c) Foreclosure of competition by hindering entry into the market;

d) Accrual of benefits to consumers;

e) Improvements in production or distribution of goods or provision of services; and

f) Promotion of technical, scientific and economic development by means of production or distribution of goods or provision of services to assess the effect of such exclusive arrangement between manufacturers and e-portals;

Thus, while analyzing exclusive supply agreements and their validity, the provisions under the Competition Act are relevant as well.

Traditional Brick and Mortar Retailers- A Consistent Adversary of E-commerce Sector

A different facet of this competition involves a fight between the E-commerce sector and the ‘brick and mortar’ retailers.

Retailers like Starmark, Crossword etc. have in the past raised issue based on alleged unfair trade practices and abuse of dominant position with reference to India’s President Shree Pranab Mukherjee’s book “The Dramatic Decade: The Indira Gandhi Years”, where a complaint was filed against Rupa Publication for granting exclusive right of selling the book to Amazon. The issue was raised before the Commerce Minister Nirmala Sitharaman, with the Confederation of All India Traders (CAIT) requesting the Minister to intervene in the matter.

Conclusion

Since, the advent of E-commerce sector in India, various legal fights have been initiated against the E-commerce portals, sometimes involving jurisdictional issues and sometimes trademark related issues. The decisions rendered by the Judiciary and quasi-judicial authorities in such cases is enabling the regulation of law governing the legal issues involved in online sale.