The acquisition of India’s largest e-retailer Flipkart by Walmart, the world’s largest company by revenue, continues to make waves. Paying up $16 billion for a 77 per cent stake in Flipkart, it is possibly the largest e-commerce deal internationally. Expectedly, the Competition Commission of India (CCI) on August 9 blessed the deal, brushing aside arguments that the merger would create an unequal playing field and legitimise deep discounting practices by the Flipkart-Walmart combine.
With their very existence under threat, lakhs of small traders and mom-and-pop kirana outlets have taken to the streets in protest. Their concerns have largely been buried by the mainline press. The Confederation of All India Traders (CAIT) and the All India Online Vendors Association (AIOVA) held a 10-lakh strong retailers’ protest all over the country on July 2 with a variety of trade unions and even the BJP-affiliated Swadeshi Jagran Manch (SJM) supporting the effort.
Now with its submissions rejected by the CCI, the trader's body CAIT has in recent days moved the National Company Law Appellate Tribunal (NCLAT) in an appeal; and considering the stakes involved, this case will ultimately wind its way to the Supreme Court. Meanwhile, another international e-tailing Goliath is consolidating its position in India through acquisitions. Fed up with their losses, many brick-and-mortar retailers like Aditya Birla Group’s More chain and Spencer’s Retail are throwing in the towel; and Amazon is moving in quickly to pick up a stake.
Even cash-strapped Future Retail may go in for an alliance with Amazon. This will give the $178 billion online giant new heft to take on Walmart-Flipkart. But then, we are moving to a two-way monopoly, a situation which may spell the end of India’s large informal retail industry, and the loss of businesses and jobs for millions.
The case against Walmart
In its petition, CAIT had argued that Flipkart, in alliance with the muscle power of Walmart, will not allow a free and ‘neutral’ marketplace for small operators. Walmart as 77 per cent owner of Flipkart is “bound to give preference to its own inventory” and overall, “there will be a denial of market access to non-preferred sellers”. Offline retailers and wholesalers too will be under pressure to sell on Flipkart, and end up facing discriminatory terms and conditions, CAIT contended.
The CCI wriggled out of taking a stand on the issues raised by the traders observing that as of now, no new entity has been created which generates a monopoly-like position. However, it conceded that Flipkart’s discounting practices would have to be dealt with the e-commerce policy which is on the anvil; and passed on the buck of ensuring a ‘neutral’ marketplace by saying “issues concerning the FDI (Foreign Direct Investment) 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.”
Hidden Agenda
The traders’ groups believe Walmart has a hidden agenda in the Flipkart acquisition. They believe that after a decade of failure in India, Walmart has acquired Flipkart not so much to enter online e-tailing as much as to acquire the data and supply chains available to Flipkart – data on consumer preferences, manufacturing capabilities of different suppliers, etc – to grow its offline business.
Walmart, on the other hand, has been vocal in pointing out that it believes in “empowering” small kiranas and Small and Medium Enterprises (SMEs) by making them part of its business. Promising “modernisation” of kiranas through better procurement and store management practices, Walmart also says the “best price” of efficient supply chains will, in fact, benefit consumers in the long run.
It is strange that the Union government before it allowed such a large FDI deal, did not do an impact assessment study on businesses and jobs under pressure because of the ganging up of Walmart and Flipkart. This was admitted in a written reply by Minister of State for Commerce C R Chowdhury in the Lok Sabha on July 20. Even the local government of New York has not allowed Walmart to open its stores within city limits for fear of small shops being put out of business. India’s retail ecosystem has over 14 million mom-and-pop stores employing over 40 million people. That’s a lot of jobs and businesses at stake! If deals such as the one Walmart has cut are allowed free rein, it will only add to the simmering discontent in the country.