Amazon moves SC against Delhi HC order on DSCs

The Supreme Court will hear on Wednesday a batch of appeals by Amazon Seller Services against the Delhi High Court’s July order that asked the e-commerce company to stop selling products of direct selling companies like Amway, Oriflame, and Modicare without prior permission and authorisation.

A bench led by RF Nariman is likely to hear the appeals by Amazon on Wednesday.

Amazon has challenged the division bench of the HC’s July 25 order that refused to stay the single judge’s order that had restrained it from displaying, advertising, offering for sale, selling, facilitating repackaging of any of the products of the direct selling companies on their websites and mobile application, except for those sellers who produce written consent. The injunction had come on petitions filed by direct selling companies alleging that Amazon was selling its products illegally.

Amazon, in its appeal before the apex court, stated that it was an intermediary as defined under the Information Technology Act, 2000 and thus protected by Section 79, which exempts an online marketplace from all liabilities arising on account of third-party information like product listings.

“In any event, the direct selling guidelines do not apply to an online marketplace. Further, the protection granted under Section 79 will over-ride the executive instructions/guidelines, which in any event have not been enacted pursuant to any statute/ statutory rule,” according to appeal.

Besides, the direct selling guidelines do not have any force of law, as they were merely executive instructions and do not give an enforceable right to a private party against another private party, it said, adding that unless the right flows from a statute, such right cannot be enforced through a civil proceeding.

Stating that it is settled law that there can be no restriction imposed on sale and/or further sale of genuine goods, the e-commerce firm stated that the goods in question were original products that have been sold by the companies themselves and title in these goods have been passed on to the purchaser and subsequent buyers, thus, no restriction can be imposed on dealing and/or sale of original goods.

Amazon further stated that the single judge had completely ignored the role played by an intermediary and had cast an obligation of seeking the consent of a direct selling firm without appreciating that no such obligation is cast upon an intermediary in law.

“The single judge’s judgment vests unbridled power with brand owners to control the downstream sale and resale of its goods, which have already been sold for consideration and in which title has passed to the buyer. The single judge has effectively created monopolies outside the existing intellectual property statutes, in direct derogation of these statutes. The single judge’s judgment converts a transaction of sale (wherein rights in the property stood transferred in favour of the purchaser) into a license (wherein only a permission to use has been granted),” the petition stated.

Stating that the single judge’s order is “manifestly arbitrary and ought to be set aside,” Amazon alleged that the single judge has passed a blanket injunction against all listings whether genuine or not and imposing liability on it, regardless of whether the sellers of the impugned products avail of its related services.

According to the appeal, while denying interim relief the DB gravely erred in overlooking the fact that the single judge’s judgment has significant and far reaching implications for online marketplaces in India like Amazon.