Flipkart is currently being investigated by CCI for alleged unfair business practices and misuse of dominant market position
Indian ecommerce giant Flipkart Group announced in a statement on July 23 the launch of Flipkart Wholesale, a new digital marketplace that promises to transform India’s retail ecosystem of mom-and-pop stores, referred to as kirana stores, facilitated by the acquisition of Walmart India, which operates the Best Price cash-and-carry business.
The announcement followed on the heels of Flipkart’s latest fundraise of $1.2 billion from a group of investors led by Walmart announced on July 14. With the latest investment, Flipkart’s valuation reached $24.9 billion post-money.
Flipkart’s acquisition of Walmart India, however, has raised alarm bells among sellers who believe the move would lead to preferential treatment of sellers and facilitate deep discounts in Flipkart’s grocery segment.
In January, the Competition Commission of India (CCI) had ordered a probe into alleged competition law violation and abuse of dominant position by Flipkart and Amazon, the two dominant ecommerce players in India.
In February, the Karnataka High Court had granted an interim stay order on the CCI’s order of the investigation. However, in March, the National Company Law Apellate Tribunal (NCLAT), triggered by the appeal of the All India Online Vendors Association (AIOVA), ordered a second probe into unfair business practices carried out by Flipkart, such as exclusive tie-ups with smartphone sellers and other retailers.
While the investigation is still underway, AIOVA sent a letter to CCI on Monday against the acquisition of Walmart India by Flipkart, citing that the firm is already under investigation for abuse of dominant power and the acquisition should therefore not be allowed.
According to the letter, Walmart India’s acquisition by Flipkart will “increase the facilitation of discounts in its online grocery store Flipkart Supermart, through preferred sellers with the help of Walmart India.”
AIOVA had previously approached CCI in May, 2018 and raised concerns about Walmart’s acquisition of 77% stake in Flipkart for $16 billion in world’s largest ecommerce deal.
“Among the objections raised then was of Walmart’s existing operations being merged with Flipkart’s operations, which was perceived to be detrimental to sellers interests, [and] now over the years it has been seen that sellers have been neglected by them,” Salman Waris, Managing Partner at TechLegis Advocates and Solicitors told Business Standard.
Flipkart’s preferential treatment of sellers and exclusive tie-ups violate the competition law as it is used an exclusionary tactic, and “will result in foreclosure of non-preferred sellers,” and “closure of small kirana shops which proved to be life savior during the pandemic,” AIOVA said in the letter.
Flipkart Wholesale, whose operations are to be launched in August 2020, will pilot services for grocery and fashion categories, according to Flipkart’s press release.
Founded in 2007, the Flipkart Group includes its ecommerce platform Flipkart, digital payments platform PhonePe, fashion ecommerce platform Myntra, and logistics and delivery service provider eKart. According to the company, Flipkart’s visits per month recently exceeded 1.5 billion, while its monthly active users (MAU) grew by 45% and transactions per customer increased by 30% in FY2020.
Currently, Flipkart offers 150 million products across more than 80 categories. PhonePe recently reported annualized total payments value (TPV) of $180 billion on more than 500 million monthly transactions.
In the year ending on March 31, 2019, Flipkart’s revenue grew 42% to over $6 billion while its losses reduced by 63% to $2.43 billion.
While Walmart India is currently a separate entity within Flipkart Group, the acquisition would allow the ecommerce giant to become bigger and go head-to-head with rivals Amazon and JioMart.
Amid all the controversy, Flipkart today announced the launch of its hyperlocal service Flipkart Quick in select locations across Bangalore, which will offer products across categories including Grocery, Fresh, Dairy, Meat, Mobiles, Electronics Accessories, Stationery Items and Home Accessories with 90 minutes delivery. Customers can also book a 2-hour slot for delivery as per convenience.
Flipkart Quick will expand to six other cities in the next few months, according to the press release.