SUMMARY
US retailer Walmart is now free to complete its $16 Bn worth acquisition of a 77% stake in Indian ecommerce company Flipkart
The CCI's decision is expected to spur traders nationwide into intensified protests against the deal
The CCI said that Flipkart’s discounting practices would be dealt with separately in the ecommerce policy
In an official tweet, the Competition Commision on India (CCI) announced that it has given its final approval to the long-awaited Flipkart-Walmart merger. In May, US retail giant Walmart acquired a 77% stake in Indian ecommerce company Flipkart for $16 Bn, in what was said to be the largest ecommerce deal in the world.
The CCI, in its order, added that the issue of Flipkart’s discounting practices would be dealt with separately in the upcoming ecommerce policy. It must be noted that the ecommerce think tank has already submitted its draft proposal for the ecommerce policy which aims to ensure a level playing field for local businesses doing digital trade in India.
The CCI said that discounting practices by Flipkart may have to be reviewed by the relevant authorities, putting pressure on regulators to clamp down on discounts on online platforms.
Earlier, Small traders, led by the Confederation of All India Traders (CAIT), had complained about discounting by Flipkart and preferential treatment for certain sellers on its platform, among other things.
“The issues concerning the FDI policy would need to be addressed in that policy space to ensure that online market platforms remain a true marketplace providing access to all retailers,” the CCI said in its order.
Walmart, which has been waiting for months to go ahead with the deal, welcomed the CCI decision.
In a media statement, Walmart said, “Our partnership with Flipkart is a 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 will position us for long-term success and enable us to contribute to the economic growth.”
Walmart India: Hiring For Its Future Team
The announcement comes just a few days after Walmart revealed its plans to hire more than 1,000 people for technology roles in India as it continues to focus on technology to fight off competition from ecommerce rivals such as Amazon.
The global retail giant has technology operations in Bengaluru and Gurugram with over 1,800 employees. Further, it is looking to expand its headcount and drive more product ownership out of India.
Recently, it was reported that Walmart was looking to shift its key executives from Gurugram to Bengaluru, where Flipkart is headquartered. Also, it will be acquiring talent from Asda unit in the UK.
After the acquisition by Walmart, Flipkart co-founder Sachin Bansal exited the company while the other co-founder, Binny Bansal, continued as the group chief executive officer (CEO). Flipkart CEO Kalyan Krishnamurthy retained his position.
Protests Over Flipkart-Walmart Deal
Since May 9, when Walmart first announced that it would acquire a 77% stake in Flipkart for $16 Bn, there have been continued debated about and protests against the potential impact of the deal on small traders in the country.
Trader associations such as the All India Online Vendors Association (AIOVA) and the CAIT appealed to the CCI to block the deal claiming it would hamper the survival of small retailers and traders in the country. On July 2, CAIT held a nationwide protest with 10 lakh retailers across the country. Other associations such as the Centre of Indian Trade Unions, the All India Kisan Sabha, the Swadeshi Jagran Manch (SJM), and small traders and shopkeepers have also been protesting against the deal.
Inc42 reported earlier that traders and shopkeepers have decided to oppose the Walmart-Flipkart deal vehemently and are ready to move the Supreme Court (SC), if required, to protect their interests.
In May 2018, a delegation of Walmart executives also met the CCI to explain the company’s planned activities in India. The notice submitted to the CCI by Walmart International Holdings said that the proposed transaction would come into effect pursuant to the share purchase agreement and the share issuance and acquisition agreement entered into by Walmart’s subsidiary and Flipkart on May 9.
It was also reported that the CCI might recommend setting up of a long-term fund by the US retail company to modernise kiranas in the future, besides supporting of local manufacturing by SMEs (small and medium enterprises). However, no such mandate has been announced so far.
Flipkart-Walmart Can Breathe Easy For Now
Now that the CCI has given its approval to the deal, traders protests are expected to intensify across the country. However, for now, Walmart and Flipkart have crossed the key hurdle of CCI approval.
Walmart’s efforts towards technologically empowering entrepreneurs and resellers have helped the company buck regular trends and grow fast in all its global markets. If SMEs in the Indian retail ecosystem have to grow, it will require a focused effort from corporates and upstream participants, including the government.
Kiranas have to adopt new technologies and practices in the retail market and, in doing so, may have limited capital and capabilities to respond effectively.
If Walmart continues with its SME-focused strategy, thousands of kirana stores in India can be supported over the next decade to sustainably improve their business.
Walmart has also opened its second fulfilment centre in India to further improve the ‘best price’ supply chain for kiranas and suppliers. “As a part of the kirana modernisation initiatives, we will provide end-to-end support to them by sharing best practice in modernised ways of procurement, store management, supply chain, marketing, digital payments and more,” said Walmart.
