The Walmart-Flipkart Deal: A New Era For The Indian E-Commerce Industry

[Hitakshi Mahendru is a 5th Year Law Student at Symbiosis Law School, Pune]


In its order dated 8 August 2018, the Competition Commission of India (CCI) approved the 77% acquisition of outstanding shares of Flipkart Private Limited (Flipkart) by Walmart International Holdings Inc (Walmart) and stated that it is not likely to have an appreciable adverse effect on competition in India. Walmart now holds substantial shares and control over Flipkart.


Walmart is a subsidiary of Walmart Inc, which  is a USA based multinational company that operates a chain of Hypermarkets, discount department stores, and grocery stores. In India the presence of Walmart is very limited. It operates through its indirect wholly own subsidiary Walmart India Private Limited which is engaged in wholesale cash and carry of goods (B2B Sales) because of the restrictions posed under the Foreign Direct Investment (FDI) policy of India.

Since Walmart is restricted from engaging into B2C sales, their operations in India are carried out through two channels, namely Best Price Stores and B2B e-commerce for members only. These are in compliance with the FDI norms in India. These stores are only allowed to sell products to different categories of businesses and retailers. In order to purchase from these stores, one has to be a member. The products that are sold by Walmart in India are very diverse, including but not limited to groceries, household products, fresh, frozen and chilled food, restaurant supplies and are priced at competitive wholesale prices. These restrictions posed by the government on foreign entities like Walmart makes their relevant market in India relatively smaller and extremely exclusive.

On the other hand, Flipkart is principally an investment holding company incorporated in Singapore. In India, besides being engaged in B2B sales, Flipkart also acts as an intermediary and provides online market places to facilitate trade between customers and sellers. Flipkart is thus not allowed to maintain inventory and is only an intermediary. It also operates in number of spheres incidental to their main business like providing a unified payment gateway, and advertising.

By 2026, India’s online retail market is predicted to grow by 1200% to 200 billion rupees making it a very lucrative investment opportunity. Flipkart has a registered user base of roughly 175 million and this can help Walmart expand into the e-commerce market despite the restrictions posed by the FDI norms in India. This deal provided Softbank which owned 21% of the shares with a rather profitable exit. The New York based Investment Firm, Tiger Global Management still retains its 5% stake while selling off 17%.

The Reasoning Behind The Decision

The CCI analysed this combination for any threat that it poses to competition in both vertical and horizontal markets. A combination would pose competition concerns if the parties are close competitors in similar lines of business (horizontal overlap). Similarly, a combination between a manufacturer and distributor who are at different levels in different markets (vertical overlap) would also pose concerns if it is likely to foreclose the market for other players. Since both the parties are engaged in B2B sales and the combination would facilitate B2C sales for Walmart, the CCI analysed the combination from both perspectives.

Walmart proposed the relevant market as pan-India market for B2B sales. The CCI observed that both the parties to the combination have substantial foreign investments and therefore they are governed by the FDI Policy of India, the extent of B2B sales are very limited, which indicates that neither parties are close competitors in the B2B sales and there is no competition concern which is raised. The market share of B2B sales of Walmart in India is less than half a percent and thus the changes on account of the combination are negligible.

Coming to the question of vertical overlap, the FDI policy restricts both the parties from engaging in B2C sales. However, there is no restriction on the parties to offer an online market place where they function merely as intermediaries. Flipkart is engaged in this kind of sales through its online platforms, namely, and while on the other hand Walmart has no presence in any online market place for B2C sales. This indicates that there is no possibility of any vertical overlap between the parties. According to the information provided by Walmart to the regulator that Flipkart will continue to operate with its original structure just under Walmart Inc, this will not only preserve the platform but also add to its financial strength.

During a inquiry conducted by the CCI, a number of representations were made by trade associations, traders/re-sellers expressing their concerns regarding the predatory pricing and preferential treatments that Flipkart was engaged in. The CCI, while acknowledging the concerns, kept the issue out while approving the Walmart-Flipkart deal, saying that it was beyond the scope of the Competition Act. It said the discounting practice of Flipkart is not specific to the deal and was prevalent in the market even without the proposed acquisition: “The issues about common customers of Flipkart are not directly or indirectly related to the proposed combination and thus, the same is not likely to alter the competition dynamics as it exists today.”

The CCI held that the proposed combination is not likely to have any adverse effect on competition in the relevant market and approved the combination.

Road Ahead

The Flipkart-Walmart deal has provided an indirect entry for Flipkart in the Indian B2C market marking the combined entity, the holder of a very large market stake. Walmart said it supports small business and ‘Make in India’ through direct procurement as well as increased opportunities for exports through global sourcing and e-commerce. The company aims to partner with kirana owners and members to help modernise retail practices and adopt digital payment technologies. The key concern in the present matter is the one raised by the traders’ organization which is extremely unhappy with the order of CCI and the reasoning behind it, for not taking into consideration the policy of predatory pricing and deep discounting which big conglomerates that Flipkart undertakes and which in return threatens the livelihood of medium and small scale enterprises. What needs to seen is the rate of growth and the increase in market share of Flipkart which now has deeper pockets and a backing by one of the world’s largest multinationals.

Hitakshi Mahendru

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