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The first-ever foreign direct investment (FDI) proposal in multi-brand retail trade, Tesco buying 50 per cent equity in Trent, has been approved by the Competition Commission of India. Tesco is a British company while Trent is part of Tata group, which operates stores under the brand name Westside in various cities.
The approval comes at a time when the new BJP Government has been vocal in opposing FDI in multi-brand retail. In fact, soon after taking charge, the new Commerce and Industry Minister, Nirmala Sitharaman, said “At this stage, the party’s position is very clear. It (multi-brand retail) probably is not best opened up now because the medium and small-sized traders and farmers have not been adequately empowered to deal with it. So immediately if you open up the floodgate of FDI, they may get affected.”
No adverse effectHowever, in its order, the CCI said “The proposed combination (Tesco and Trent) is not likely to have appreciable adverse effect on competition in India and, therefore, the Commission hereby approves the proposed combination.”
While the previous UPA Government had opened up FDI in this sector, some States had put a spanner in the works of foreign retailers planning to set up shop here by deciding against implementing the FDI policy.
Recognising this scenario, the CCI said as the FDI policy regarding multi-brand retail has not been implemented in Gujarat and Tamil Nadu, Trent Hypermarket Ltd has entered into a Stores Transfer Agreement on March 31, 2014, with Fiora Hypermarket Ltd (a wholly owned subsidiary of Trent), to transfer its four stores operating in Gujarat and Tamil Nadu.
“It is observed that while THL (Trent Hypermarket Ltd) is engaged in the business of multi-format retail trading in India, including hypermarkets, supermarkets and smaller convenience stores, TOIL (Tesco Overseas Investments Ltd) is not present in the retail market in India and therefore, there is no horizontal overlap between the business activities of THL and TOIL in the retail market in India,” the commission said.
It also observed that Trent Hypermarket’s total revenue during 2012-13 was about ₹785 crore, “which is insignificant as compared to the size of the overall retail market as well as the organised retail market in India.”
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