NCLAT dismisses appeal against CCI approval to Flipkart’s acquisition by Walmart

The National Company Law Appellate today dismissed an appeal against an order passed by the Competition Commission of India approving Flipkart’s acquisition by Walmart. (CAIT vs CCI & Anr).The judgment was passed by Chairperson Justice SJ Mukhopadhyay and Member (Judicial), Justice Bansi Lal Bhat in the appeal preferred by Confederation of All India Traders (Appellant)..In May 2018, the Competition Commission of India (CCI) had received a notice under Section 6(2) of the Competition Act, 2002 by Wal-Mart International Holdings, Inc. (Walmart), a subsidiary of Walmart Inc. for acquisition between 51% and 77% of the outstanding shares of Flipkart Private Ltd (Flipkart) and other incidental matters..After taking into consideration all relevant facts including the objections raised by various trade associations, traders/retailers, including the Appellant, the CCI approved the combination under Section 31(1) of Competition Act, 2002.In appeal against the approval, the Appellant argued that the effect of the transaction was anti-competitive in nature. .It was submitted that once Walmart has the effective control over the e-commerce platform, Flipkart and the web of preferential sellers, Walmart would definitely sell its inventory on platform of Flipkart or through a web of associated preferred sellers. This, the Appellant stated, would deny market access to non-preferential sellers. .The Appellant submitted that contray to Walmart's stand that it was only involved in B2B (business to business) sales, evidence suggested that they have started indulging in B2C (business to customer) sales too..It was, therefore, argued that the market to be analysed was the B2C market in respect of the online market in India. .Walmart, on the other hand, argued that the Appellant had no locus standi to challenge the CCI order and the concerns raised by the Appellant were not specific to the transaction in question..Walmart submitted that CCI's approval process for combinations assessed horizontal as well as vertical overlaps to determine if the transaction was likely to cause appreciable adverse effect on competition. In this regard, Walmart added that the CCI had concluded that Flipkart and Walmart were not close competitors in B2B sales and the actual vertical overlaps between the parties was miniscule..It was added that under the existing Foreign Direct Investment Policy of 2017, parties could not engage in B2C sales, offline or online, on any end-consumer marketplace, including on Flipkart..After considering the submissions made by the parties, the NCLAT opined that in absence of any evidence on record, CCI rightly came to the finding that the proposed combination did not result in elimination of any major player in the relevant market.".The appellant has failed to show that any major player in the relevant market will be eliminated due to combination in question. On the other hand, the Flipkart marketplace platform will remain under the operation of 2nd Respondent (Walmart), thus not only preserving a successful ecommerce platform but also enhancing the financial strength of the platform."NCLAT.The NCLAT further stated that in absence of any prima facie opinion that the combination was likely to cause or has caused appreciable adverse effect on the competition within the relevant market in India, the CCI was not required to follow the procedure under Section 29 and Section 30 of the Competition Act and was required to pass order of approval under Section 31..In view of the above, the NCLAT opined, "In the present case we find no prime facie case has been made out on the facts of the case or by appellant. We hold that there is no requirement on the part of the Commission to follow the procedure under Section 29 and 30 of the Act and it rightly passed order of approval under Section 31 of the Act.".The NCLAT also noted that though the allegation were made against Flipkart, it was not impleaded as a party to the appeal. "..in such circumstances no specific finding can be given against the Flipkart in the present appeal.", it said. .In view of the above, the NCLAT concluded that there was no merit in the appeal and the same was dismissed. .The Appellant was represented by Advocates Abir Roy, Prerana De..CCI was represented by Senior Advocate Prashanto Chandrasen with Advocates Balaji Subramanian, Ishani Banerjee..Walmart was represented by Senior Advocates Abhishek Manu Singhvi, Rajiv Nayar with Shardul Amarchand Mangaldas Advocates Anuj Berry, Yaman Verma, Malak Bhatt, Sonali Charak, Aakarshi Agarwal..Read the Judgement: