CAIT TO KNOCK DOORS OF COURT & A NATIONAL MOVEMENT AGAINST DEAL
The approval to Walmart Flipkart deal by the Competition Commission is arbitrary, illogical and in utter disregard of the principles of natural justice since the Commission neither took cognisance of the valid objection raised by the Confederation of All India Traders and various other organisation nor gave any opportunity to place their view point. It is a one sided exercise by the Commission much against the larger interest of the economy and the nation-said the Confederation of All India Traders (CAIT) today.
The CAIT while lodging its strong protest against the decision of the Commission has decided to move to the Court to seek justice and has also convened an emergent meeting of its National Governing Council on 19th August at Nagpur to decide future strategy for a nationwide movement against the deal. The CAIT will also knock the doors of the Central Government and it has sought an appointment with Union Finance Minister Mr. Piyush Goyal and Commerce Minister Mr. Suresh Prabhu and if need arises, the CAIT will also urge Prime Minister to intervene.
The CAIT in its petition to CCI alleged that the proposed combination would lead to a huge degree of vertical integration in the market since Walmart is a global retail giant with its own range of multi-brand products and where the B2B market is concerned, there is a high likelihood of Flipkart and Walmart would affect other wholesalers on the platform thus eliminating them in the long run by using several methods such as creation of algorithms perpetuating a search bias in favour of Walmart, and the creation of preferred sellers who would be receiving commissions and discounts which would not be available to other sellers on the platform. It was further alleged that offline retailers or sellers would not be able to compete with the combined power of Flipkart and Walmart due to their deep pockets.
CAIT National President Mr. B.C.Bhartia & Secretary General Mr. Praveen Khandelwal said that the Competition Act mandates the CCI to act in furtherance of the principles of natural justice. Despite repeated objections of CAIT and other trade associations, the CCI denied them an opportunity of being heard on the pretext that the same is not envisaged at this stage of combination approval explicitly under the Act. Passing an order without hearing CAIT which would be affected by the combination showed a gross misstep on the part of CCI and is a violation of natural justice principles.
They further said that the CCI also ignored in its order the predatory activities carried out by both Flipkart and Walmart in the past, despite acknowledging such predatory practices by Flipkart prior to this proposed combination. The CCI, which is supposed to adjudge the likelihood of impact of a combination if it is approved on the market, completely disregarded the predatory activities undertaken by both parties in India and abroad in the past that were categorically put forth in the objections filed by CAIT. Such repeated patterns in their behaviour obviously merited consideration by the CCI.
Both Mr. Bhartia & Mr. Khandelwal said that the CCI’s observations about the unorganized market placing competitive restraints on the proposed combination are entirely baseless and no reasoning has been placed to demonstrate the same. Without the same organizational structure, deep discounts and investors, unorganized sellers are hardly part of the same market, let alone effective competitors against the two giants. With rapid digitization of India and the ease of door to door delivery by e-commerce websites, customers in the long run would naturally prefer deeply discounted products available online which smaller unorganized sellers cannot provide along the way. To consider them as imposing effective competitive constraints on the proposed combination has been a fallacious observation by the CCI.
The CCI acknowledged that a small number of sellers accounting for substantial sales on Flipkart received several discounts from the e-commerce giant. This is only bound to get aggravated once Walmart comes into the picture, as Walmart’s goods through preferred sellers would be prioritized and given discounts by Flipkart, thus pushing smaller non-preferred sellers out of online markets (e.g., clothing and apparel) where Flipkart is the leading e-commerce platform. The same is not only against the spirit of competition law but also in violation of FDI norms which mandate the maintenance of a level playing field.
The CCI quite explicitly noted that an issue with respect to anti-competitive agreements may arise in this situation. Given that the CCI has the power to take up such matters by its own motion, it is staggering to see CCI merely acknowledge the issue but not act upon it.
Mr. Bhartia & Mr. Khandelwal said the CCI, however, noted that the FDI aspect of the said combination may merit policy intervention and intervention via other legal instruments and is a matter of consideration for the relevant authority. It further stated that the same policy which may be formulated in this regard would need to address the FDI concerns raised by CAIT so as to ensure an equitable online marketplace for all retailers.