Walmart and Flipkart spent a few days in suspense not knowing if their $16 billion acquisition deal where Walmart gets to own 77% of Flipkart and gains complete control over its operations, would be cleared by CCI.
But Competition Commission of India, CCI, the body authorized to assess if deals of these nature were in conformity with the Competition Act or not, gave its clear approval last week.
The voices dissenting against the deal in the form of Swadeshi Jagran Manch and Confederation of All India Traders (CAIT), the tradersâ€™ body, were not convinced with the detailed explanation given by CCI on why it considered the deal quite above board. SJM is an organization which propagates use of indigenously available technology and resources and opposes foreign investment being encouraged indiscriminately in all areas.
Now, fearing that SJM and CAIT may take the legal recourse to place obstacles on its way, Walmart has pre-empted any such move and has filed a caveat in the Delhi High Court. Filing a caveat ensures that the court will give Walmart an opportunity to place its position before the court in case SJM or CAIT file a case against the Flipkart deal.
The opposition from these entities revolves around 2 major issues. One is that these ecommerce firms like Amazon and Walmart are violating the Foreign Direct Investment or FDI regulations under which they obtain their licenses to operate their businesses. The other issue raised from the trading community has to do with the huge discounts they offer to the customers in their online transactions which gives them some unfair advantages which the brick and mortar traders donâ€™t enjoy.
With the CCI having dismissed all these charges, it will be interesting to know what stand the court takes on the same issues. But, with the caveat in place, Walmart may go about its taking over operations as scheduled.