India’s competition regulator has given the Walmart-Flipkart deal a greenlight

• The Competition Commission of India (CCI) has approved Walmart’s acquisition of a 77% stake in Flipkart.
  
• The deal, which is slated for completion next year, will be one of the largest in India’s corporate history.
  
• The greenlight marks the culmination of three months of deliberations by the CCI over the validity of the deal.

The investors of Flipkart can rejoice for they’re about to earn a very handsome profit on their investment in the Indian e-commerce platform. The Competition Commission of India (CCI), the country’s competition and antitrust regulator, has approved Walmart’s $16 billion acquisition of a 77% stake in Flipkart, paving the way for the deal to be completed by mid-2019. The deal is the one of the largest in the history of India’s private sector.

@CCI_India approves proposed acquisition of Flipkart Private Limited by Wal-Mart International Holdings, Inc

— CCI (@CCI_India) August 8, 2018

The greenlight marks the culmination of three months of deliberations over the validity of the deal. Reports surfaced in June that the regulator would impose structural changes to the deal to alleviate antitrust concerns. An example of this was the possible establishment of a long-term fund to support small businesses and kirana stores.

Walmart announced the acquisition in May 2018. However, the deal has received a lot of backlash from industry bodies, specifically the Confederation of All India Traders (CAIT), which said that the deal would hurt competition and encourage “predatory pricing” tactics and loss leadership in India’s e-commerce market.

In its ruling, the CCI expressed its concern at the habits of deep discounting and preferential access to sellers that are so intrinsic to the industry. However, it said that these habits did not have a bearing on whether or not the deal should be approved. The CCI added that the deal would not “adversely affect competition” in the sector.

In response to the approval, the CAIT has said it will file an appeal in court. However, the CCI’s decision is likely final. As per the Indian government’s draft e-commerce policy, a regulator will be established for the sector. The policy also calls for the localisation of data, the increased participation of small businesses on online retail platforms and limits the amount of influence a platform has on cutting prices by preventing bulk purchases of goods from third-party sellers and introducing a pre-determined discount window.

Next steps for Walmart and Flipkart

With the deal sealed, Walmart is expected to send a large group of senior executives to India to oversee the merger and analyse the Indian market. It will also onboard a number of private labels and vendors to Flipkart’s platform.

Meanwhile, Flipkart is readying the rollout of its online grocery operation - Supermart. It will reportedly invest $264 million in the business over the next three years. After launching in Bengaluru earlier this summer, the service is expected to go live in Delhi, Chennai and Hyderabad by the end of 2018.