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TMI Blog2020 (3) TMI 1483X X X X Extracts X X X X X X X X Extracts X X X X ..... se effect on competition within the relevant market in India, is not required to follow the procedure under Section 29 and Section 30 of the Act and required to pass order of approval under Section 31. The Commission observed that both the parties to the Proposed Combination are entities with foreign investments and are thus governed by the Foreign Director Investment Policy which explains B2b Sales as Cash and Carry Wholesale trading/Wholesale trading, would mean sale of goods/merchandise to retailers, industrial, commercial, institutional or other professional business users or to other wholesalers and related subordinated service providers. Wholesale trading would, accordingly, imply sales for the purpose of trade, business and profession, as opposed to sales for the purpose of personal consumption. The yardstick to determine whether the sale is wholesale or not would be the type of customers to whom the sale is made and not the size and volume of sales. Wholesale trading would include resale, processing and thereafter sale, bulk imports with export/ex-bonded warehouse business sales and B2B e-commerce. This lays the boundaries of B2B sales within which the parties to the combin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a Share Purchase Agreement on 9th May, 2018 by and among Walmart and certain shareholders of Flipkart (SPA) and a Share Issuance and Acquisition Agreement on the same day by and among Walmart and Flipkart (SIAA). 2. During the inquiry into the matter, the Commission received representations against the proposed combination from trade associations, traders/retailers including appellant, Confederation of All India Traders raising objections to the said transactions. The Competition Commission of India (Commission) after enquiry taking into consideration all relevant facts including the objections raised by the appellant, issued order dated 8th August, 20158 under sub-section (1) of Section 31 of Act 2002 approving the combination. 3. Learned counsel for the appellant submitted that the effect of the transaction in the relevant matter is anti-competitive and determined on non- preferential sellers, would be further accentuated post the combination takes effect. 2nd respondent (Walmart) would have effective control over the e- commerce platform and the web of preferential sellers. In such a situation, 2nd Respondent (Walmart) would definitely sell its inventory on platform of fli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch results whereas identical products with same ratings by other sellers are pushed down in the search results and often to subsequent pages. Thus products of its preferred, related sellers in the first few pages of the search results and those of the non-preferred sellers having the same quality and ratings in later pages of the search results and there is no other basis such as payment of any price for such listing. Empirical evidence shows that customers would not look at products on subsequent pages and thus, sales of non-preferred traders, like members of the appellant are severally affected and in process, are effectively foreclosed from the market and denied market access. The appellant submits that a similar issue of search bias is before the Hon'ble NCLAT in the Google case, Competition Appeal (AT) No.18/2018. Flipkart also lends the term "assured" to sales made by its preferential sellers, thus creating a bias in minds of customers in favour of such products sold by such preferential sellers. d) The small retailers/wholesalers have been forced to partner with Flipkart due to lack of options online and sufferinig due to Flipkart's deep discounting model and are being t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... izontal overlap between the parties is limited to the wholesale business to business (B2B) market in India. In the impugned order, the Commission has correctly observed that (i) Flipkart and Walmart are not close competitors in B2B sales; and (ii) their combined market share of less than 5% post Transaction does not raise competition concerns. Moreover the actual vertical overlaps between the parties is miniscule. These facts and figures have not been challenged by the appellant. 9. Further according to 2nd Respondent (Walmart) that under the existing Foreign Direct Investment Policy 2017 the Parties cannot engage in Business to Customer B2C sales whether offline or online on any end-consumer marketplace based e-commerce platform, including on Flipkart. Com. The appellant's concerns with potential vertical overlaps between the Walmart and Flipkart.com are predicted upon a presumption that: (i) Flipkart is in violation of the existing FDI Policy and already operates in the B2C space; and (ii) Walmart intends to violate the FDI Policy and operate in the B2C space by selling on Flipkart.com. There has never been a finding of violation of the FDI Policy against the parties, which indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the provisions contained in sections 29, 30 and 31. (4) The provisions of this section shall not apply to share subscription or financing facility or any acquisition, by a public financial institution, foreign institutional investor, bank or venture capital fund, pursuant to any covenant of a loan agreement or investment agreement. (5) The public financial institution, foreign institutional investor, bank or venture capital fund, referred to in sub- section (4), shall, within seven days from the date of the acquisition, file, in the form as may be specified by regulations, with the Commission the details of the acquisition including the details of control, the circumstances for exercise of such control and the consequences of default arising out of such loan agreement or investment agreement, as the case may be. Explanation - For the purposes of this section, the expression- (a) "foreign institutional investor" has the same meaning as assigned to it in clause (a) of the Explanation to section 115AD of the Income-tax Act, 1961(43 of 1961); (b) "venture capital fund" has the same meaning as assigned to it in clause (b) of the Explanation to clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as it thinks appropriate, for bringing the combination to the knowledge or information of the public and persons affected or likely to be affected by such combination. (3) The Commission may invite any person or member of the public, affected or likely to be affected by the said combination, to file his written objections, if any, before the Commission within fifteen working days from the date on which the details of the combination were published under sub-section (2). (4) The Commission may, within fifteen working days from the expiry of the period specified in sub-section (3), call for such additional or other information as it may deem fit from the parties to the said combination. (5) The additional or other information called for by the Commission shall be furnished by the parties referred to in sub-section (4) within fifteen days from the expiry of the period specified in sub-section (4). (6) After receipt of all information and within a period of forty-five working days from the expiry of the period specified in sub-section (5), the Commission shall proceed to deal with the case in accordance with the provisions contained in section 31." 23. From the aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreements and abuse of dominance. The Commission observed unlike anti-competitive agreements and abuse of dominance conduct, that are prohibited, combinations are only regulated under the Act for the purpose of provision of Section 6(1) i.e. combination which causes or is likely to cause an adverse effect on competition within the relevant market in India. It considered the horizontal overlap and what is overlap. The Commission observed that both the parties are engaged in B2B sales and thus, there exists horizontal overlap between their businesses in the said segment. 2nd Respondent (Walmart) has proposed the relevant market as 'pan-India market for B2B sales', which is being characterized by intense competition among a very large number of competitors-both online and offline. The Commission observed that both the parties to the Proposed Combination are entities with foreign investments and are thus governed by the Foreign Director Investment Policy which explains B2b Sales as "Cash and Carry Wholesale trading/Wholesale trading, would mean sale of goods/merchandise to retailers, industrial, commercial, institutional or other professional business users or to other wholesalers an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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