Multi-Pronged Investigation Begins Against $16 Billion Walmart-Flipkart Deal

The influential fringe group SJM and the Confederation of All India Traders had filed separate complaints with India’s competition watchdog, involving the Walmart-Flipkart deal, which flouted key norms on the acquisition of Indian assets by foreign entities, while expressing concerns regarding predatory pricing.

New Delhi (Sputnik) — India's Ministry of Commerce has initiated a multi-pronged investigation against the $16-billion Walmart-Flipkart deal over a complaint filed by right-wing fringe group Swadeshi Jagran Manch (SJM).

READ MORE: Indian Traders' Body Files Petition Against $16 Billion Walmart-Flipkart Deal

In an official memorandum sent to the Reserve Bank of India, the Enforcement Directorate, the Competition Commission of India, and the Income Tax Department, the ministry has asked these agencies to examine the complaint regarding "alleged irregularities in various aspects including FDI policy norms, competition and taxation issues in the Walmart-Flipkart deal."

"SJM in its letter has alleged that Flipkart is illegally carrying out multi-brand retail trading through e-commerce by flouting FDI policy norms by a complex corporate structure. It is mentioned in the letter that the management of Flipkart is presenting itself as an entity in the B2B segment whereas it is operating in both the B2B and B2C segment," a Ministry of Commerce office memorandum reviewed by Sputnik reads.

Multi pronged investigations ordered by the Ministry of Commerce in #Walmart #Flipkart deal. It is alleged that deal violates FDI rule of the country pic.twitter.com/bOd3kzpqGR

— Rishikesh Kumar (@rishhikesh) May 31, 2018

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After 19 months of negotiations, Walmart had struck a $16 billion deal last month with Flipkart, which controls approximately 39 percent of India's e-commerce market. SJM – a sister body of India's ruling Bharatiya Janata Party – had alleged that U.S. retail giant Walmart Inc was "circumventing" rules for a "back-door entry" into India with its majority stake acquisition of Flipkart.

"We have noticed that Flipkart promoters initially transferred the ownership of the companies operating in India to Singapore and in subsequent years made changes in ownership of the holding company at different valuations without paying any taxes in India [resembling] the Vodafone Case," SJM said in its complaint.

SJM's co-convener, Ashwani Mahajan, had also written a letter to Prime Minister Narendra Modi, asking him to ensure that the interests of those at the bottom of the pyramid in retail and agriculture space were safeguarded.

Earlier, SJM had said that this deal would further eliminate small and medium businesses, and hinder opportunities to create more jobs.

READ MORE: Google Faces $1.4Bln Fine in India for Rigging Search Results

Earlier this week, the Confederation of All India Traders had separately filed a complaint with the country's competition watchdog, the Competition Commission of India, wherein it argued that Walmart's acquisition of a 77 percent stake in Flipkart would result in unfair market conditions for competitors and predatory pricing.