India Accuses Samsung, Xiaomi of Colluding with Amazon and Flipkart

Highlights: 

• Big smartphone brands like Samsung and Xiaomi are embroiled in an antitrust case involving Amazon and Flipkart. 
• Both smartphone companies are accused of launching products exclusively online, which violates competition laws. 
• The Competition Commission of India (CCI) states that such practices harm smaller Indian retailers. 

NEW DELH: Samsung and Xiaomi, along with other major smartphone companies, have been accused of colluding with Amazon and Walmart’s Flipkart to launch products exclusively on their Indian websites, according to regulatory reports reviewed by Reuters. The Competition Commission of India (CCI) has found these actions to be in violation of the country's antitrust laws. 

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The CCI's investigations reveal that Amazon and Flipkart gave preferential treatment to specific sellers, prioritized certain product listings, and offered deep discounts, which negatively impacted smaller retailers. This comes as part of a broader probe into how the two e-commerce giants operate in India's booming online marketplace. 

A comprehensive 1,027-page CCI report on Amazon specifically names the Indian subsidiaries of Samsung, Xiaomi, Motorola, Realme, and OnePlus, accusing them of collaborating with Amazon for exclusive phone launches, which violates competition law. Similarly, a 1,696-page report on Flipkart highlights the involvement of Samsung, Xiaomi, Motorola, Vivo, Lenovo, and Realme in similar practices. 

The inclusion of well-known smartphone manufacturers like Samsung and Xiaomi in this antitrust investigation adds further legal and compliance challenges for these companies. G.V. Siva Prasad, the additional director general at the CCI, stated in both reports that exclusivity in business "not only stifles free and fair competition but also goes against consumer interests." 

Smartphone Giants Under Scrutiny 

The CCI's findings, dated August 9, mark the first time that smartphone manufacturers have been implicated in such practices. These findings were not made public until Reuters obtained access to them. Xiaomi declined to comment on the matter, while other smartphone makers and the CCI did not respond to Reuters’ requests for comment. 

The CCI reports suggest that both Amazon and Flipkart sought to downplay the allegations of exclusive product launches during the investigation. However, CCI officials noted that these practices were widespread and detrimental to competition. 

Impact on India's Smartphone Market 

According to Counterpoint Research, Samsung and Xiaomi are two of the largest players in India's smartphone market, commanding a combined 36% share, while Vivo holds a 19% share. The e-retail market in India is projected to exceed $160 billion by 2028, a significant increase from $57-60 billion in 2023, as per consultancy firm Bain. 

The CCI’s findings represent a major setback for both Amazon and Flipkart, which have been criticized by small retailers for undercutting their offline businesses for years. Small retailers have long complained that these e-commerce platforms offer steep discounts and exclusive launches, making it difficult for them to compete. 

Additionally, the CCI reports reveal that both companies leveraged their foreign investments to subsidize services like warehousing and marketing for select sellers, giving them an unfair advantage over competitors. 

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Financial Scrutiny 

The CCI has now ordered companies like Xiaomi, Samsung, OnePlus, Realme, and Motorola to submit their financial statements for the fiscal years up to 2024. The statements must be certified by their auditors, as part of the investigation. 

The ongoing investigation was initiated in 2020 following a complaint by an affiliate of the Confederation of All India Traders, the country’s largest retail association with 80 million members. In the coming weeks, the CCI will review objections from Amazon, Flipkart, and the accused smartphone companies. Depending on the findings, the CCI could impose fines and mandate changes to business practices. 

Exclusive Launches Hurt Retailers 

Indian retailers have consistently voiced concerns about exclusive phone launches online, arguing that shopkeepers are left at a disadvantage. Often, they receive the latest models much later than the e-commerce platforms, leading consumers to make purchases online instead. The CCI reports note that these exclusive launches "severely impacted ordinary sellers on the platforms as well as brick-and-mortar retailers." 

Datum Intelligence, an Indian research firm, estimates that 50% of phone sales in India were made online in 2023, a sharp rise from just 14.5% in 2013. Of these sales, Flipkart commanded a 55% share, while Amazon held 35%. 

With these revelations, the Indian smartphone and e-commerce sectors are likely to face closer scrutiny as authorities aim to level the playing field for all retailers. The outcome of this investigation could shape the future of online retail in one of the world’s fastest-growing markets.