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Flipkart-Walmart Deal Gets India Regulator's Nod, Offline Retailers To Move Court

Aug 9, 2018 by Avanish Tiwary
Flipkart-Walmart Deal Gets India Regulator's Nod, Offline Retailers To Move Court

The anti-competition watchdog for India’s businesses, Competition Commission of India (CCI), has approved the USD 16 billion acquisition of indigenous online marketplace Flipkart by the US-based Walmart, making it the biggest acquisition ever to happen in the country.

“@CCI_India approves proposed acquisition of Flipkart Private Limited by Wal-Mart International Holdings, Inc,” CCI said in a tweet on Wednesday.

The Walmart-Flipkart deal that was announced in May this year was pending government’s approval. The organisation keeps an eye on large acquisition deals and is required to approve acquisitions that are above a specific threshold. Walmart acquired 77% shares of Flipkart for USD 16 billion.

In a statement, Walmart India said, “We welcome the CCI’s decision. Walmart remains committed to contributing to the Indian economy by supporting small-holder farmers, manufacturers, and our kirana customers.”

However, the Confederation of All India Traders (CAIT), a lobby organisation of offline retailers, is not happy with the CCI decision. Praveen Khandelwal, CAIT secretary general said the organisation was not even given an opportunity to present their side of the story.

“It is most unfortunate that leaving aside the objections raised by CAIT, the commission has approved the deal. Without giving any opportunity of hearing to CAIT, the CCI has flayed the principle of natural justice. We deeply condemn such an attitude and will certainly move the higher court against the decision of the CCI,” Khandelwal said.

In its 12-page ruling, CCI said, “Considering the facts on record and the foregoing assessment, the commission is of the opinion that the proposed combination is not likely to have an appreciable adverse effect on competition in India and therefore, the same is hereby approved in terms of Section 31(1) of the Act.”

Since Walmart acquired the majority shares in the Indian online marketplace, there have been spurts of protests by offline retailers on Indian streets calling the acquisition “a backdoor entry by the US firm.” Post the CCI nod, the retailers lobbying body CAIT has called for an emergency meeting to strategise a nationwide protest movement.

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Courtesy: Walmart

According to CCI’s ruling the concerns of deep discounting and preferential treatment to some of its sellers might merit examination from competition perspective, but is irrelevant when it comes to deciding if the acquisition should be given a green signal.

“Our partnership with Flipkart is testament to our continued confidence in our ability to contribute to this market. Flipkart is a prominent player in India with a strong, entrepreneurial leadership team that is a good cultural fit with Walmart. We believe that the combination of Walmart’s global expertise and Flipkart’s market leadership will position us for long-term success and enable us to contribute to the economic growth of India,” Walmart said.

Harsh Shah, founder of an O2O fashion retailer Fynd believes offline sellers are facing a lot of trouble when it comes to deep discounting offered by online behemoths such as Flipkart and Amazon. “One of the biggest reasons online marketplaces are able to give huge discount is because brands sell their defective products to these online merchants,” Shah said.

Avanish Tiwary

Avanish Tiwary is a Bangalore-based tech journalist. He focuses on emerging Indian startups and unicorns. He can be reached at avanish.tiwary@thepassage.cc.

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