Abstract
This blog analyses the allegations in the July 2026 FIRST complaint against Flipkart concerning a Rs. 3,000 crore self-replenishing subsidy pool. It argues that if established, such structural tax arbitrage mechanisms constitute a novel form of abuse of dominance that traditional predatory pricing frameworks may be ill-equipped to address. Blog examines whether Indian competition law, as currently structured, can adequately respond to structurally embedded anti-competitive conduct in platform markets.
Introduction
On July 2, 2026, the Forum for Internet Retailers, Sellers and Traders (Hereinafter “FIRST”) filed a complaint before the Competition Commission of India (Hereinafter “CCI”), accusing Flipkart of engaging in anti-competitive practices that allegedly exclude independent sellers from India’s e-commerce market. The complaint contends that Flipkart has created a “self-replenishing subsidy pool” of approximately Rs. 3,000 crores annually through the reduction or avoidance of GST liabilities.
This blog does not treat these allegations as established facts. Competition law analysis must proceed on the basis of evidence and adjudication nevertheless, the novelty of the alleged mechanism raises important questions about the adequacy of India’s existing competition law framework. This blog examines a central regulatory gap: If the allegations in the FIRST complaint are established, does Section 4 of the Competition Act, 2002, provide an adequate framework to address such structurally embedded anti-competitive conduct?
The Alleged Mechanism
The FIRST complaint alleges that Flipkart generates significant financial gains through the reduction or avoidance of GST liabilities, creating an annual “self-replenishing reservoir of funds” estimated at Rs. 3,000 crores. This subsidy pool is deployed through Flipkart's B2B arm, Flipkart India, which supplies goods below cost to 33 preferred sellers, who resell them on Flipkart's marketplace at below-cost rates. The complaint argues that independent sellers cannot match these prices, leading to their exclusion from a platform that controls a dominant share of India's e-commerce market.
Section 4 of the Competition Act, 2002: The Governing Framework
Section 4 of the Competition Act (Hereinafter “the act”) prohibits the abuse of a dominant position. The provision establishes a two-stage enquiry: first, the relevant market must be defined and dominance therein established and second, the conduct must be examined to determine whether it constitutes an abuse.
Defining the Relevant Market and Establishing Dominance
Under Section 2(r) and (s) of the act, the relevant product market is determined with reference to substitutability, while the relevant geographic market under Section 2(t) of the act is determined with reference to the area in which conditions of competition are homogeneous. In the context of the Flipkart complaint, the relevant market would be defined as the market for online retail platforms in India.
Section 2(h) of the act defines a dominant position as a position of strength that enables an enterprise to operate independently of competitive forces or to affect competitors or consumers in its favour. The Explanation to Section 4, read with Section 19(4) of the act, enumerates factors for assessing dominance, including market share, size and resources, economic power, and entry barriers. If established, Flipkart's alleged market share would strongly support a finding of dominance, particularly when combined with network effects and switching costs.
The Predatory Pricing Framework
Section 4(2)(a)(ii) of the act defines predatory pricing as selling goods or services at a price below cost to reduce competition or eliminate competitors. The leading authority is MCX Stock Exchange Ltd. v. National Stock Exchange of India Ltd., where the CCI applied a two-stage test, first, whether pricing was below average variable cost and second, whether the dominant player could recoup losses after eliminating competitors.
In Uber India Systems Pvt. Ltd. v. CCI, the Supreme Court dismissed Uber’s appeal against COMPAT’s order directing a Director General investigation. The Court found that a prima facie case existed because Uber’s per-trip losses of Rs. 204 made no independent economic sense. This was a procedural holding upholding the initiation of an investigation rather than a substantive articulation of the dominance test.
The CCI in Matrimony.com Ltd. & Consumer Unity & Trust Society v. Google LLC & Ors. applied an effects-based approach to exclusionary conduct, finding that Google's restrictive syndication agreements denied competing search services market access, and thereby contravened Section 4. The Commission’s own language was that these practices were “marginalizing competitors and endangering their viability.”
Applying this framework to the alleged Flipkart mechanism raises challenges. The complaint does not allege that Flipkart itself sells below cost. It alleges that Flipkart India supplies goods below cost to preferred sellers, who then sell below cost. The question is whether this constitutes predatory pricing under Section 4(2)(a)(ii).
The Limits of the Traditional Framework
The Attribution Question
Section 4(2)(a)(ii) contemplates that the enterprise in a dominant position is the entity selling below cost. In the Flipkart case, the below-cost selling is allegedly done by the 33 preferred sellers, not Flipkart itself. The question is whether Flipkart can be held liable for their conduct.
The concept of a “group” under Section 5 of the Competition Act of the act has, in practice, already been used by the CCI within Section 4 proceedings. In Matrimony.com Ltd. v. Google LLC, the Commission treated Google LLC, Google India Private Limited, and Google Ireland Limited as a single group under Explanation (b) to Section 5 of the act for the purposes of establishing dominance and abuse, collectively calling them “Google” throughout the dominance and abuse findings. This provides a doctrinal foothold though not a fully worked-out attribution test for extending similar reasoning to the relationship between Flipkart Internet, Flipkart India, and the 33 preferred sellers, assuming the requisite degree of control can be established on the facts.
The Subsidy Mechanism
Traditional predatory pricing analysis focuses on pricing below cost, funded by external capital. The alleged Flipkart mechanism involves a self-replenishing subsidy pool generated internally through tax structuring. This differs from traditional investor-funded predation in two respects - the subsidy pool regenerates annually, making it sustainable, and it is embedded in the corporate architecture rather than dependent on external investor decisions.
The source of the subsidy is relevant to the recoupment analysis. If the subsidy regenerates annually, the dominant player may not need to recoup losses in the traditional sense. The subsidy is not a loss to be recouped, but a structural feature sustained indefinitely.
Structural Abuse: A Conceptual Framework
The alleged Flipkart mechanism points toward a category of conduct that may be described as “structural abuse” conduct arising from the architecture of a corporate group or platform ecosystem, rather than from discrete transactional decisions.
The Concept
Structural abuse involves systemic features - the design of corporate group structures, the flow of resources between group entities, and the creation of self-sustaining mechanisms that generate anti-competitive effects. The alleged Flipkart mechanism exemplifies this: a corporate architecture that allegedly generates a self-replenishing subsidy pool through tax structuring, deploys it through a B2B subsidiary, and uses it to fund below-cost pricing.
What would a structural abuse test look like under Section 4? It would require: (i) establishing dominance in the relevant market; (ii) identifying a structural feature of the corporate group or platform ecosystem; (iii) demonstrating that this feature systematically produces anti-competitive effects; and (iv) showing that the conduct is not merely a discrete transaction but a recurring, self-sustaining mechanism. Each prong carries a distinct evidentiary burden. Dominance would be established through market share, network effects, and entry barriers. Structural features under the second prong would require establishing resource flows between group entities or tax-driven subsidy mechanisms records however these are records typically held by the enterprise itself, making evidentiary access a genuine constraint. The anti-competitive effect of such a feature would be shown through exclusion of rivals or foreclosure of market access effects that may be actual or likely and lastly, the self-sustaining character under prong 4 would require proof of annual regeneration of the subsidy pool or consistent patterns of below-cost pricing.
The test is not without its critics. It may be over-inclusive, potentially capturing legitimate business structures such as ordinary tax planning or efficient group financing. Alternatively, an enterprise could argue that the structural feature serves a legitimate business purpose unrelated to exclusion such as operational efficiency or legitimate tax structuring. These concerns are mitigated by requiring proof of each prong and permitting the enterprise to challenge the evidentiary basis of the alleged structural abuse. The Explanation to Section 19(4) already permits consideration of “economic power” and “entry barriers” factors that could encompass structural features.
Comparative Jurisprudence
In the European Union, the Google Shopping case found that Google abused its dominant position by giving preferential treatment to its own comparison-shopping service in search results. The case involved the design of the search algorithm itself - a structural feature. The General Court upheld the decision in 2021, and the Court of Justice of the European Union dismissed the appeal on 10 September 2024.
In Germany, Section 19a of the German Competition Act (GWB), introduced in 2021, empowers the Bundeskartellamt to prohibit anti-competitive conduct by companies of “paramount significance for competition across markets”. The provision recognizes that structural features network effects, data advantage, ecosystem integration can create anti-competitive effects that traditional doctrines may not capture. The Bundeskartellamt has used Section 19a in proceedings against Google and Meta, though these remain ongoing.
The United States FTC's case against Meta examines structural features of the platform ecosystem. However, this case remains pending and its outcome is uncertain; it illustrates regulatory intent rather than settled doctrine.
These examples demonstrate that structural analysis is emerging in multiple jurisdictions. Indian competition law has not yet developed a similar doctrine, but the Google Shopping precedent and Germany's Section 19(a) suggest a path forward.
The AIOVA Litigation: A Cautionary Tale
The 2018 complaint by the All India Online Vendors Association (Hereinafter “AIOVA”) against Flipkart illustrates the delays inherent in India’s enforcement framework. The CCI closed the complaint on 6 November 2018, finding no contravention. AIOVA appealed to the NCLAT, which on 4 March 2020 set aside the CCI's order and directed an investigation. In February 2026, the Supreme Court set aside the NCLAT’s order and remanded the matter for fresh consideration, noting that the NCLAT had relied on Income Tax Appellate Tribunal findings that were subsequently reversed.
The AIOVA complaint filed in 2018 remains unresolved in 2026. This eight-year timeline illustrates why a case-by-case approach to structural abuse may be inadequate and why legislative or doctrinal clarity is necessary rather than relying on enforcement alone to address architecturally embedded conduct effectively.
Remedies and the Case for Structural Reform
Assuming the allegations are established, existing remedies may be inadequate.
Under Section 27(b) of the act, CCI can impose penalties of up to 10% of turnover for the preceding three financial years. In Excel Crop Care Ltd. v. CCI, the Supreme Court held that this turnover must be read as relevant turnover, not the enterprise's total turnover, to satisfy proportionality. For a diversified entity, this makes fines a weaker deterrent, since the penalty base excludes revenue from unrelated verticals. However, a fine remains a one-time punishment regardless of its base. If the subsidy pool regenerates annually, the conduct may persist even after a fine is imposed.
Behavioural remedies under Section 27(a) address the symptom (below-cost pricing), rather than the cause (the structural subsidy mechanism). Structural remedies such as separating B2B operations from marketplace operations, prohibiting cross-subsidization, or mandating disclosure of financial flows may be more effective.
Notably, Section 28 of the act already empowers the CCI to direct division of a dominant enterprise, and the Supreme Court in Coal India Ltd v. CCI acknowledged its scope. However, this provision remains underutilized and procedurally untested in platform markets, particularly where anti-competitive conduct is embedded in recurring structural mechanisms rather than discrete transactions. Its application to self-replenishing subsidy pools remains judicially untested.
Thus, while Section 28 provides an existing statutory basis for structural remedies, the uncertainty surrounding its invocation in such novel scenarios reinforces the need for doctrinal clarity on deploying structural remedies against architecturally embedded conduct.
This blog advances a normative position that Indian competition law must evolve to address structural conduct in platform markets. Comparative jurisprudence provides a roadmap the Google Shopping case, Germany's Section 19a, and even the pending FTC v. Meta matter all demonstrate that structural analysis is both possible and necessary.
Legislative reform should be considered. India has not enacted a digital competition law analogous to the EU's Digital Markets Act or Germany's Section 19a. Alternatively, the CCI and courts could develop the doctrine of structural abuse through adjudication, interpreting Section 4 broadly to encompass structural conduct. The Explanation to Section 19(4), which permits consideration of “economic power” and “entry barriers,” provides a statutory basis for such an interpretation.
Conclusion
The alleged Flipkart mechanism is not merely a complaint about predatory pricing. It raises fundamental questions about whether India’s competition law framework is equipped to address the structural features of platform markets. The traditional predatory pricing framework, focused on discrete pricing decisions, may be ill-suited to capture conduct that is embedded in corporate architecture and sustained through self-replenishing mechanisms.
The answer to whether Indian competition law can address structural abuse will determine whether competition law can effectively regulate the platform economy in India. The CCI, the courts, and ultimately Parliament must decide whether to adapt the existing framework or create a new one.