Walmart’s $16-bn Flipkart stake buy gets antitrust approval
India’s antitrust regulator has approved Walmart Inc’s purchase of a majority stake in e-commerce company Flipkart, saying the $16-billion transaction is unlikely to harm competition in the South Asian nation.
The proposed deal “is not likely to have an appreciable adverse effect on competition” in India, the Competition Commission of India said in a 12-page order.
The CCI noted that both Walmart and Flipkart operated in business-to-business segment of India’s overall retail industry. After examining the transaction and the industry structure, the regulator concluded that the deal was not likely to have any adverse implication on competition irrespective of the whether the market is taken as all B2B sales or narrower B2B markets on the basis of a particular category of product sold by the two companies.
The world’s biggest brick-and-mortar retailer hopes the deal will give it a leg-up to its international business and take on homegrown rival Amazon.com Inc.
According to the CCI order, the transaction has two components. One, Flipkart will issue ordinary shares worth $2 billion to Walmart. Two, Walmart will purchase preference shares worth $14 billion in cash from some existing shareholders.
The sellers include the SoftBank Vision Fund, the $93-billion private equity fund of Japan’s SoftBank Group Corp; New York-based investment firm Tiger Global; South African tech conglomerate Naspers; and Flipkart co-founder Sachin Bansal.
The deal was, however, opposed by a section of traders and retailers. In late May, the Confederation of All India Traders had filed an objection to the deal with the competition watchdog and raised concerns about losing business if the transaction went through.
The CCI said that most of the concerns raised by traders and retailers had no relation to the competition aspect of the proposed transaction. As a result, the regulator cannot consider those objections, it said.
The All India Online Vendors Association, a lobby group, welcomed the CCI’s decision on Wednesday. “We welcome Walmart to Indian e-commerce market and we hope to get more business under them,” said a spokesperson for the association that claims to represent around 2, 000 sellers.
The group said anti-competitive practices and the alleged violation of foreign direct investment policy can be a problem for Indian companies held by Singapore-registered holding company Flipkart Pvt. Ltd
The CCI, however, said that issues related Flipkart’s compliance with foreign direct investment norms and the deal’s impact on jobs were not under the purview of the antitrust watchdog, though they may require policy intervention.
The regulator also said the concerns raised by traders and retailers that may merit examination from a competition perspective were deep discounting and preferential treatment to select e-tailers in online marketplaces of Flipkart. The commission said it has asked Walmart to furnish details on preferential treatment to select sellers and concerns related to deep discounting.