Walmart Knocks On CCI Door With Flipkart For ‘Courtesy Call’

Days after Walmart wrote to the CCI (Competition Commission of India) seeking the body’s approval for its acquisition of Flipkart’s 77% stake for $16 Bn, top executives of Walmart India and Flipkart met the CCI to explain their activities in India after the Walmart-Flipkart agreement of the merger.

Although a meeting was reportedly held between the CCI and Flipkart-Walmart, there was no official word on it. According to an ET report, sources claimed that it was a “courtesy call” by the executives of the two companies. During the meeting with CCI member Sudhir Mittal, the executives of both the companies reportedly apprised the regulatory authority of the American retail company’s global sourcing plan from India, which includes sourcing from farmers, working on the model of kirana stores, and its supplier development programmes.

Among the executives who took part in the meeting were Walmart India president and CEO Krish Iyer and its senior vice-president and chief corporate affairs officer, Rajneesh Kumar. Flipkart CEO Kalyan Krishnamurthy and its group legal head R Baweja were also part of the ‘courtesy call’ to the CCI, according to the report.

The retail giant runs only its cash-and-carry business in India due to FDI restrictions, maintains that its partnership with Flipkart is a “pan-India market for B2B sales”. In its written submission for approval for the deal, Walmart said that the relevant market for the purpose of the proposed transaction is the pan-India market for B2B sales.

In their application to the CCI, the two companies have said that the acquisition, proposed through Walmart International Holdings, doesn’t raise any competition concerns. Walmart India is already planning a massive expansion as is evident from its chief executive Krish Iyer’s announcement that the company will open 50 new stores in India from the current 21 stores within the next five years.

The notice submitted to the CCI by Walmart International Holdings also said that the proposed transaction would be effected pursuant to the share purchase agreement and the share issuance and acquisition agreement entered into on May 9 by and among Walmart’s subsidiary and Flipkart.

During the meeting, Walmart reportedly told the regulator that Flipkart is a Singapore-based investment holding firm, which, with its direct and indirect subsidiaries operating both in India and abroad, is primarily engaged in the business of wholesale cash and carry. It also provides e-commerce platforms to facilitate trade between customers and sellers in India, Walmart said.

Even as Flipkart and Walmart celebrate the landmark merger, the CCI has been receiving a number of complaints from the Indian consumer Internet sector. The AIOVA (All India Online Vendors Association) has filed a petition against Flipkart for giving “preferential treatment” to a few sellers to enable deep discounts on its platform.

Retailers have also joined hands to approach the CCI against the $16 Bn Walmart-Flipkart deal as the merger is speculated to result in massive job losses in the retail industry. Besides, traders body the Confederation of All India Traders (CAIT) has also said that it will approach the CCI to file an objection against the deal. The CAIT is claiming that the agreement will lead to an uneven playing field and massive job losses.

The CAIT has also written to commerce minister Suresh Prabhu, asking the minister to let the trade bodies know the steps being taken by the government to scrutinise the deal.

Considering the fact that trader’s bodies like CAIT are concerned with the nature of the Flipkart-Walmart deal, they are raising issues relating to the FDI policy, cybersecurity, law manipulations, etc. Fair play regulator CCI will have to keep its keen eyes on both the companies making the merger deal as well as listen to the concerns of the trade organisations.

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.