Though the agreement between Walmart and Flipkart to take over the latter is being formalized and Walmart has even gone ahead and submitted the mandatory filing with the SEC in the US, the approvals from the Indian authorities may come with certain conditions.
This is due to the spate of objections brought up by many trade bodies that the deal would affect millions of smaller sellers. The regulatory body, the Competition Commission of India has hinted that it may respond to the application from Walmart to approve its deal to take over 77% of Flipkart for a consideration of $16 billion and the approval may also be accorded, but with several riders.
It has also been indicated that the CCI might take for reference a similar approval that Walmart obtained in South Africa while taking over a company there, Massmart after agreeing to conditions being imposed by the corresponding competition regulator in South Africa. This happened in 2010-11.
These conditions largely relate to creating a support system that ensures the small retailers are encouraged and prevented from failing completely due to the competition brought about by the merger of such huge companies in similar lines of business.
The proposed changes to be suggested by CCI and in all probability accepted by Walmart would be structural in nature and may include setting up of a fund to help in modernizing the small retail stores, locally called kirana stores. There would also steps initiated to strengthen the SMEs (small and medium enterprises) that will help them become vendors for Walmart. Such a fund may not be dissimilar to the R100 million supplier development fund that was created in South Africa after the local traders objected to the takeover of Massmart by Walmart and the matter was finally adjudicated in the court.
The final formalities of the Walmart-Flipkart deal may be completed only by the end of the calendar year 2018.