Comments
The Competition Commission of India has given its approval for US retail giant Walmart’s acquisition of e-commerce company Flipkart.
In its order on Wednesday, the Commission said, “Considering the facts on record... the Commission is of the opinion that the proposed combination is not likely to have an appreciable adverse effect on competition in India.”
“The parties are neither close competitors in the B2B (Business to Business) sales nor have a combined market share that raises competition concern,” CCI said.
The market share of Walmart in B2B sales in India is less than half a percent and the incremental changes on account of the proposed combination is insignificant, the order stated. “The proposed combination is not resulting in elimination of any major players in the relevant market,” it added.
No vertical overlap
The CCI did not also find any vertical overlap between the B2B businesses of Walmart and Flipkart; on the issue of horizontal overlap, the combined market share of the parties would be less than 5 per cent.
It said that the information provided by Walmart is confidential at this stage, in terms of and subject to the provisions of Section 57 of the Act, which deals with punishment for personation of shareholder. However, it said that “the order shall stand revoked if, at any time, the information provided by Walmart is found to be incorrect or misleading.” In May, Walmart announced its intent to acquire 77 per cent stake in Flipkart in a $16-billion deal. “Immediately after the closing of the acquisition, all Flipkart preference shares will convert into ordinary shares and as a result, Walmart will hold approximately 51-77 per cent of the outstanding shares of Flipkart. Walmart may assign its rights under the SIAA (Share Issuance and Acquisition Agreement) in whole or in part, to any other entity,” the order said.
Welcoming the CCI approval, Walmart said in a statement, “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 will position us for long-term success and enable us to contribute to the economic growth.”
Considered one of the biggest exits the country’s startup has seen, it did not go well with domestic trade organisations that approached the CCI. The organisations raised concerns over the deal stating that it will create unfair competition and an uneven level playing field for domestic players and will indulge in predatory pricing, deep discounts and loss funding.
Praveen Khandelwal, Secretary General, Confederation of All India Traders (CAIT), said, “Without giving a hearing to CAIT, the CCI has flayed (the) principle of natural justice. We deeply condemn such an attitude and will certainly move higher courts against the decision of the CCI.”
“The CAIT has called an emergent meeting of its governing council on August 19 at Nagpur to take stock of the situation and finalise strategy for a nationwide movement,” Khandelwal added
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.