Understanding the Walmart-Flipkart Deal: Part I (Parties and their Business Models)

By: Ahkam Khan & Alok Chaurasia

This blog post is the first in the forthcoming 3-part editorial series concerning the Walmart-Flipkart deal. In the first post, the authors seek to analyse the parties to the deal, their business models, and restrictions on foreign players under India’s FDI policy.


Over the last few years, the struggle to secure consumer market has intensified with big corporations investing huge chunks of money to identify consumer base having high expenditure and consumption. In pursuance of this, often, large buyers buy out stake in existing power players to exert better control and extol larger profits from the ever-widening consumer market. The newly formed merged entities work at greater efficiencies and often enjoy economies of scale. However, because of their pivotal position and considerable influence over suppliers and manufacturers, they may undoubtedly inflict damage on small businesses and traders consequently harming consumers in the process. This is where regulation of combinations becomes a task indispensable to the protection of competition and prevention of unfair trade practices in the markets.

In May 2018, Walmart, US-based retail giant, announced that it shall be acquiring 51-77% stake in e-commerce giant Flipkart triggering its largest acquisition until now. However, the proposed takeover was met with stiff opposition from trade organisations, in particular, the Confederation of All India Traders (hereinafter ‘CAIT’), who claimed that the deal would result in heavy discounts and predatory pricing in the market. On 8 August 2018, the Competition Commission of India (hereinafter ‘CCI’) passed an order proclaiming its acquiescence for the proposed deal while reasoning that the said combination will have no detrimental effect on the existing market. It held that CAIT’s concerns were misplaced since CCI’s duty only involves anticipating a change in market structure due to the combination; it cannot arrest combinations on grounds of practices already existing in the market, as that would mean an investigation under the section 3 and 4 of the Competition Act.



Walmart is a Bentonville based US retail giant that operates over 11,000 stores with more than 2 million employees in more than 11 countries including China, India and the UK. Walmart has continued to grasp a strong hold on its top position on the Fortune 500 list for the last few years. The company has invested heavily to enhance its outreach and improve the consumer experience in a bid to win market share from its rivals Amazon, Costco and Target. The keystone to Walmart’s business strategy is its ‘everyday low prices’ guarantee with large sales volumes made possible by a large consumption base and magnitude of operations, a highly efficient supply chain that reduces outlays and maximises productivity, low operational and overhead costs, and, finally, leveraging its position in order to force suppliers to provide goods on lower prices.

Walmart’s presence in India has always been an excellent fodder for controversy with FDI restrictions in multi-brand retail industry and protests from homegrown sellers. Walmart entered the Indian market back in 2007 in a joint venture with Bharti Enterprises to build and operate ‘Cash and Carry’ superstores across India under the name of ‘Best Price Modern Wholesale’. However, in October 2013 the partnership came to an abrupt end with both Bharti and Walmart going their separate ways citing reasons ranging from restrictions on investment practices to mandatory sourcing from small and medium enterprises. Walmart continued to operate in India through its 21 Best Price stores across different locations in the country.

Walmart Inc. is present in India through its indirect wholly owned subsidiary Walmart India Private Ltd. which operates exclusively in the B2B market because of FDI restrictions that prevent it from entering the B2C market. Walmart carries out its business through two channels in India namely ‘Best Price stores’ and B2B e-commerce stores. These stores are exclusively meant for institutions, hotels, businesses etc. that have registered themselves as members and are consequently allowed to sell and purchase. The phrase “cash and carry” connotes a marketplace where goods, merchandise are sold to institutions, retailers, industrial, commercial, institutional or other professional business users or to other wholesalers and related subordinated service providers, as opposed to procurement for personal consumption.


Flipkart Group operates through its structured arms in different sectors. The branches ultimately meet at the trunk or the parent entity of the group, which is the Flipkart Pvt Ltd. headquartered in Singapore. Flipkart Pvt Ltd. is present in the offline B2B sector through its “cash and carry” arm, which is similar to Walmart’s business activities in India. In B2B transactions, goods are brought from various manufacturers, suppliers, distributors and are sold to various third parties that make bulk purchases.

At the same time, the majority of Flipkart Pvt. Ltd.’s operations in India take place through an online interface which facilitates trade between sellers and consumers in the form of a marketplace based e-commerce entity, Flipkart.com. In the online marketplace, the role of Flipkart is restricted to that of an intermediary; it only acts as a facilitator between various retailers and final customers. It does not maintain an inventory and the revenue generated is a certain percentage of the total value of the goods sold (or commission), which is then recovered from the seller. This, however, has not stopped Flipkart from becoming a giant in the booming e-commerce industry with a market share and sales rivalling that of the well-established deep-pocketed giant like Amazon.


India has amassed massive capital inflow, thanks to watering down of FDI restriction by the government. The total FDI increased to $61.96 billion in 2017-18. India’s FDI policy restricts foreign players from directly engaging with customers in India. On account of restrictions (51% of equity) in multi-brand trading, retail trading in any form is not permissible. Foreign entities who wish to enter the Indian market can only do so through Business-to-Business model (B2B) and not Business-to-Consumer model (B2C). They are required to make an initial investment of US $100 million. Further, 50% of this investment is supposed to be invested in back-end infrastructure (processing, manufacturing, distribution, design improvement, quality control etc.) and at least 30% of procured goods shall be purchased from Indian micro, small and medium industries. Retail trading through e-commerce is also prohibited; e-commerce entities are only allowed to provide a marketplace for sellers where they can engage with buyers, registered with its platform, on a B2B basis. However, e-commerce entities are barred from exercising ownership over inventories i.e. goods to be sold, any warranty/guarantee of goods and services sold will be the responsibility of the seller.


Walmart cannot mimic its universally successful model of multi-brand retail trading in India because of this FDI policy. What is more important is the fact that Walmart cannot pervade the retail industry due to the ban on B2C model. Therefore, its sales are restricted to businesses and institutions in its B2B stores. Even through e-commerce, it can run only a marketplace model and not the inventory model, which allows the selling of goods owned by the entity. Therefore, in the B2C circuit, its acquisition of Flipkart would still bar it from selling its own goods on the platform. However, this is only one of the situations in which Walmart could have disrupted the retail market. The series seeks to explore the other conducts as well, which the CCI’s order has failed to consider through which the acquisition could still play an important role in the Indian trade industry.

(The upcoming posts in the series shall analyse the CCI’s order in detail while contemplating the genuineness of CAIT’s woes with respect to the acquisition.)

(Ahkam and Alok have served as the editors of The RMLNLU Law Review Blog. Both the authors are currently students at Dr. Ram Manohar Lohiya National Law University, Lucknow.)

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