New Delhi: Having cleared global retail giant Walmart’s $16 billion acquisition of home-grown Flipkart, fair trade watchdog CCI has opined that complaints about the deal violating FDI rules “may merit policy intervention” but do not fall under its ambit.
The Competition Commission also observed that the complaint about Flipkart’s discounting practice or preference to select e-tailers is not specific to this merger deal and is “already prevalent” in the market. It also made it clear that there is no bar on the regulator to examine these issues under relevant provisions of the Competition Act about anti-competitive agreements and abuse of dominance.
The deal has triggered opposition from several quarters including traders lobby groups and several of them had submitted their complaints to the CCI, which was approached in May for approval of the acquisition. Walmart announced in May the acquisition of 77% stake of Flipkart in its biggest takeover till date.
More than 100 traders’ organisations opposed the deal
- In the following month, more than 100 trader bodies opposed the deal stating it will cause “irreversible damage” to small traders and endanger jobs for thousands.
- CCI said it received representations against the deal from various entities which had expressed concerns on compliance of FDI norms.
- “The Commission notes that majority of the concerns expressed in the representations…have no nexus to the competition dimension of the proposed combination,” CCI said.
- “Issues falling beyond the scope of the act cannot be a subject matter of examination by the Commission, though they may merit policy intervention,” it said.
- According to the order, the deal have not made a distinction between organised and unorganized cash and B2B sales and considered both these as part of one relevant market.
- The regulator noted that the proposed combination is not likely to have any adverse implication on competition irrespective of the whether the market is taken as all B2B sales.
CAIT terms CCI NOD as ‘most unfortunate’
- The Commission deliberated extensively on the concerns raised in the representations but concluded that the instrument of regulation of combinations cannot address these and different policy and legal instruments maybe taken recourse to.
- “This review process cannot be a window to resolve concerns that are not incidental or arise from the proposed combination,” the CCI said.
- However, the regulator noted that there is no bar on it at any point of time to examine the issues regarding the deal under the relevant provisions of Section 3 and 4 the Competition Act and regulations made there under.
- Traders’ body CAIT, which has been opposed to the deal, had described the CCI approval as “most unfortunate” and said it would approach the court against the decision.
“Even if both the segments are defined as separate markets and the parties (Warmart and Flipkart) are considered to be present in organised B2B sales.” – Competition Commission of India.