Flipkart-Walmart deal gets regulatory approval

The Competition Commission of India (CCI) approved US retail giant Walmart’s $16-billion deal to acquire Indian e-commerce major Flipkart, clearing the path for the biggest FDI deal in the Indian corporate sector.(See: For $16 bn Walmart bags Flipkart). 

Walmart had in May this year agreed to acquire a 77-per cent stake in Flipkart in a deal worth $16 billion, its biggest so far and had sought CCI approval for the deal.
The deal values the 11-year-old Indian e-commerce firm at $20.8 billion.
In a tweet on Wednesday, the CCI stated that it has cleared the Flipkart-Walmart deal. "@CCI_India approves proposed acquisition of Flipkart Private Limited by Wal-Mart International Holdings, Inc," the regulator said in a tweet.
The CCI approval comes despite objections by Indian retailers that the acquisition will pave the way for the entry of Walmart, a multi-product retailer, into the Indian retail market, which at present is not permitted.
However, the regulator did not agree with the argument that the deal between Flipkart and Walmart threatened the retail scenario in India.
Separately, CCI said Flipkart’s discounting practices might need to be dealt with, an issue that assumes significance in the wake of the new draft policy that proposes further restrictions on discounting by online marketplaces. India already bans discounting by online marketplaces.
“The issues concerning FDI policy would need to be addressed in that policy space to ensure that online market platforms remain a true marketplace providing access to all retailers,” CCI said in its order.
While seeking CCI approval, Walmart had assured the CCI that the deal will not lead to any competition complications and the pecking order of the Indian retail sector will remain unaffected.
In fact, Walmart has maintained that the deal will ultimately benefit the small traders and farmers, and will create employment.
The CCI approval, however, is likely to face opposition from small retailer groups who have all along been opposing the deal, on grounds that the resultant entity will combine retail and e-commerce business to eat into what is now left of the market of small retailers.
Retailers had even threatened to move court if the government failed to stop the deal.
Early this week, Walmart had announced plans to hire 1,000 professionals for handling the technical aspect of its venture in India.
While the Flipkart-Walmart alliance is aimed at holding off competition from e-commerce giant Amazon, the US retail giant also said that the combination will generate at least 30,000 direct and indirect jobs by establishing 15 wholesale cash and carry stores across Uttar Pradesh.