The Competition Commission of India (CCI), which is scrutinising Walmart’s acquisition of majority stake in homegrown e-commerce player Flipkart, has sought the government’s response on the foreign direct investment (FDI) rules for the sector ahead of a decision, which is expected in a few days.
Sources told TOI that the department of industrial policy and promotion, whose comments have been sought by the fairplay watchdog, is expected to cite the FDI rules, which provide for 100 per cent overseas investment through the automatic route. This means that no government clearance is required, with CCI being the only agency whose prior approval is needed in case of large transactions.
On its part, CCI has already sent two-three sets of questions to Flipkart and Walmart, seeking details of the American company’s B2B model, the overlap that it may have with the e-commerce venture and common consumers for the two outfits. In addition, sources said, the regulator has sought to understand Flipkart’s business model, which had initially raised some concerns. “Given CCI’s mandate, it will evaluate the transaction from all possible angles before deciding if it impacts the market and creates a dominant entity,” said an officer.
The rules require CCI to provide a preliminary report on large transactions within 60 days, with the final outcome to be decided in 210 days. While the first deadline is around mid-August, a decision may come a little earlier, sources said.
The regulator’s queries come in the wake of complaints lodged by lobby groups such as CAIT, All India Online Vendors Association and RSS-affliated Swadesh Jagran Manch (SJM), which are bitterly opposing the deal, the largest ever transaction in the country’s nascent but booming e-commerce space.
On their part, Walmart and Flipkart executives have argued that the deal is meant to counter the rising influence of Amazon in the Indian market and is not going to affect the market dynamics and will only result in a change in shareholding, which was, in any case, majority owned by overseas investors.
The transaction is not a merger and Walmart’s B2B operations will remain separate. It will not create an entity that will account for over half the market share or anything like that,” said a source. Walmart is acquiring a 77 per cent stake in Flipkart from investors including SoftBank, Sachin Bansal and a host of other investors in what is its biggest e-commerce push globally.
(This article was originally published in The Times of India)
Source: Economic Times