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CAIT files petition against Walmart-Flipkart deal in Competition Commission of India

The Confederation of All India Traders (CAIT) filed an objection petition in Competition Commission of India against Walmart-Flipkart deal.

Confederation of All India Traders (CAIT) filed its objection petition in Competition Commission of India (CCI) against the Walmart-Flipkart deal via CAIT Advocate Abir Roy.

CAIT National President BC Bhartia and Secretary General Praveen Khandelwal informed that in its petition, the CAIT has strongly objected the merger of two companies. It has, in its petition, also said that Walmart, which is world’s largest retailer, would create an unfair competition and uneven level playing field and indulge in predatory pricing, deep discounts and loss funding.

The petition further said that Flipkart is a combination of predation, exclusive tie-ups and of preferential sellers, where even online vendors face discriminatory conditions. Walmart being the owner by virtue of 77% share is bound to give preference to its inventory. There will be denial of market access to non-preferred sellers coupled with complete annihilation of small time traders on offline platform.

Walmart, arguably world’s largest retailer in the market, would sell its inventory on the platform of flipkarts website. It would either sell its inventory directly or through a web of associated preferred sellers with the result that their market share would rise exponentially. Pure offline retailers / wholesalers would have two options either exit the market or sell their goods on flipkarts website and face discriminatory terms and conditions from the same in comparison to its preferred sellers. This will create an unhealthy competition much to the disadvantage of both offline and online sellers.

It was also submitted that access to vast resources of data to be used for targeted advertisements for consumers as also creating private label and sell the same through preferred sellers. This transaction would result in vertical integration, which no other player in India would have. The combined entity would have affiliates in the entire supply chain. The complainant apprehends that the deal is bound to circumvent established laws and FDI policy of the government since the ultimate object of Walmart is to enter the retail trade of the country and in the absence of any policy on e-commerce or retail trade, it would be easy for Walmart to reach out to retail market, which otherwise it cannot enter due to FDI policy.

Capital is a huge entry barrier (due to the manner, in which the said market has evolved) and even established players would find it difficult to enter this market unless they are fine with burning cash. In sum and substance, the said transaction would result in removal of several competitor or competitors in the market. It would soften the competition, to a great extent. The CAIT, which is India’s largest body of trading community representing about seven crore traders across the country, has prayed to dis-allow the transaction between Walmart and Flipkart.

CAIT has below enlisted the grounds on objection against Walmart-Flipkart deal.

GROUNDS FOR OBJECTIONS AGAINST WALMART-FLIPKART DEAL

  • Flipkart has a leading market share across certain product categories (like smartphones and fashion) through a combination of predation (which they have admitted in a tax proceedings), exclusive tie ups and preferential sellers. The market presence would be further augmented once the said transaction takes place. This would lead to adverse effect on both offline market and online markets: 

Offline markets: The offline retailers/ wholesalers would not be able to compete with the said conglom-erate due to lack of funding.

Online market: Due to the prevalent market practices, small traders have to partner with e-commerce players like Flipkart but they have to face discriminatory conditions. This fact would be accentuated since Flipkart would, probably, give preference to inventory of Walmart.

Both Walmart and Flipkart have a demonstrated history of engaging in predation, which they would con-tinue in India, resulting in foreclosure to other offline retailers/wholesalers.

  • Walmart, arguably world’s largest retailer in the market, would sell its inventory on the platform of flip – kart.com either directly or through a web of associated preferred sellers with the result that their market share would rise exponentially and pure offline retailers / wholesalers would have two options: (i) exit the market or (ii) sell their goods on flipkart.com and face discriminatory terms and conditions from flipkart. com in comparison to its preferred sellers.

 

  • There is no level playing field on flipkarts platform. There is a clear case of discrimination which is there between preferential sellers and other sellers in terms of commission, discounts etc. which would be further accentuated because of this transaction. There is a clear case of denial of market access for these non-prefer-ential sellers on online platform coupled with complete annihilation of small time trader on offline platform.

 

  • Flipkart and Walmart have access to vast amounts of data, which they would use for targeted advertise-ments for consumers. They would create private labels (on the lines of Smart buy etc.) for products, which are fast moving (based on data analytics) and sell the same via their preferred seller network. These pre – ferred sellers, like WS Retail, Retailnet, Omnitech Retail, SupercomNet are only on the platform of Flipkart and not on any other platform.

 

  • The present modus operandi is very clear: Flipkart purchases goods and sells at discounted prices, while incurring a loss, to few sellers like W.S. Retail, Retailnet, Omnitech Retail which are further sold on the plat-form of Flipkart. Flipkart purchases goods and sells at discounted prices, while incurring a loss, to few sellers like W.S. Retail, which are further sold on the its platform.

 

  • Furthermore, there are important competition concerns regarding Walmarts role on Flipkarts B2B plat-form. With Walmart, a global retail giant with its own range of multi-brand products, attempting to take another shot at the Indian market, there is a high likelihood of Flipkart and Walmart would affect other wholesalers on the platform and eliminating them in the long run. In several cases global search engines have been shown to use certain algorithms to favour their partners or services in searches and there is a possibility for Flipkart to increase listings for Walmarts inventory or propagating a search bias for Walmart? inventory in its platform.

 

  • Similar to the entire modus operandi of preferential sellers, they may create preferential sellers with better commissions / discounts in order to augment the sale of Walmarts inventory. This would have an adverse effect on competitors in both the online and offline market, both at the B2B level and B2C level.

     

    • In addition, Flipkart (through its subsidiary, Myntra) has launched private labels, which are Myntra Fash-ion Brands on which they are sold at high margins, and Flipkart also controls the sales, marketing and dis-tribution of their products. The sellers of these private brands are also preferential sellers of Flipkart, thus eroding the very concept of level playing field.

     

    • This transaction would result in vertical integration, which no other player in India would have. The combined entity would have affiliates in the entire supply chain. The Complainant apprehends that the deal is bound to circumvent established laws and FDI policy of the government since the ultimate object of Walmart is to enter the retail trade of the country and in the absence of any policy on e-commerce or retail trade, it would be easy for Walmart to reach out to retail market, which otherwise it cannot enter due to FDI policy.

     

    • Capital is huge entry barrier (due to the manner in which the said market has evolved) and even established players would find it difficult to enter this market unless they are fine with burning cash.

     

    • In sum and substance, the said transaction would result in removal of several competitor or competitors in  the market and would  soften the    competition, to a great extent. 

     

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