CCI Approves Acquisition of Minority Shareholding of 7.8% of Aditya Birla Fashion and Retail Limited by Flipkart Investments Private Limited

On January 20, 2021, the CCI approved the acquisition of a minority shareholding of 7.8% on a fully diluted basis in Aditya Birla Fashion and Retail Limited (‘ABFRL’) by Flipkart Investments Private Limited (‘FIPL’).[1]

FIPL is a wholly-owned subsidiary of Flipkart Private Limited (‘FPL’). It is a newly incorporated company under the laws of Singapore and is registered as a category II foreign portfolio investor under the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019. FPL belongs to the Walmart Group.

The Walmart Group consists of Walmart Inc. (‘Walmart’) and its affiliates. Walmart, a company incorporated in Delaware, USA is engaged in retail and wholesale operations globally. Walmart undertakes the following businesses in India: (i) wholesale cash and carry of goods (across various product categories such as mobiles, electronics, lifestyle (including apparels, footwear and accessories (‘AFA’)), books & general merchandise (including groceries, toys), home furnishing (including kitchenware) and furniture); (ii) provision of market based e-commerce platforms; and (iii) UPI and prepaid payment instrument services through PhonePe.

Additional ancillary services that the Walmart Group provides in India include (i) payment gateway; (ii) advertising services; (iii) information technology product related issues; (iv) logistics, courier, and other allied services; (v) installation, repair, and other allied services; (vi) technology based services; and (vii) sale of private label products.

ABFRL is part of the Aditya Birla conglomerate, engaged in the business of manufacturing and retailing branded AFA, through its retail stores, multi-brand outlets, departmental stores, online retail platforms and e-commerce marketplaces, across India. It has three subsidiaries in India, namely Jaypore E-commerce Private Limited (‘Jaypore’), TG Apparel & Décor Private Limited (‘TG Apparel’) and Finesse International Design Private Limited (‘Finesse’).

The parties identified horizontal overlaps in the broader market for B2B sales in India (‘Broad Relevant Market’) and in the narrower market for B2B sale of AFA products in India (‘Narrower Relevant Market’). The CCI, noting that the combination is not likely to cause an appreciable adverse effect on competition (‘AAEC’), decided to leave the exact delineation of the relevant market open, as the combined market share of the parties in the Broad and Narrow Relevant Market were 0-5% and 5-10% respectively. The CCI further noted that the incremental market share is insignificant, and the market is characterised by the presence of various other players, such as Amazon Wholesale, Reliance Retail in the Broad Relevant Market; and Page Industries, Raymond, etc. in the Narrow Relevant Market.

With regard to vertical/complementary relationships, the parties identified the following relationships:

i.     ABFRL’s B2B sales and Walmart Group’s B2B distribution: ABFRL manufactures and sells products within the AFA category, and also sells jewellery, home décor and furnishing products to both B2B and B2C customers. The Walmart Group on the other hand, trades in products under various categories, within the B2B segment in India. As such, the Walmart Group is a customer of ABFRL, situated downstream to ABFRL in terms of its B2B sales.

ii.    Walmart Group’s B2B sales and ABFRL’s B2C sales/distribution: Potential vertical relationship between the B2B business of the Walmart Group (upstream) and ABFRL (downstream) whereby the Walmart Group can supply its AFA category products to ABFRL on a B2B basis, which ABFRL may then sell on to end-customers.

iii.   Walmart Group’s e-commerce marketplaces and ABFRL’s B2C sales: ABFRL uses the Walmart Group’s e-commerce marketplace services as just one of the channels through which sales are undertaken.

iv.    PhonePe’s UPI and wallet payment services and ABFRL’s sales (both B2B and B2C): PhonePe’s UPI payment application and mobile wallet are complementary to ABFRL’s sales in India, among other digital payment solutions.

v.     ABFRL’s sales through the Walmart Group’s e-commerce marketplaces and the Walmart Group’s logistics services offered to sellers on its marketplaces: ABFRL is a seller on the Walmart Group’s e-commerce marketplaces in India, though there is no exclusivity or preferential treatment provided towards any sellers, including ABFRL.

The CCI noted that the existing or potential vertical/ complementary relationship(s) between the parties did not raise any competition concerns as the presence of the parties in the identified upstream and downstream markets was insignificant to raise any competition foreclosure concerns in India. As such, the CCI granted its approval.

However, in addition to the above, the CCI highlighted the strategic commercial arrangement proposed to be entered between FPL’s Indian subsidiary, Flipkart India Private Limited and ABFRL pertaining to the distribution of certain identified branded products of ABFRL through e-commerce platforms of Walmart Group to the exclusion of certain platforms identified therein, for a limited period of time. The CCI noted that such exclusive arrangement raises potential concerns regarding preferential treatment of ABFRL brands on the e-commerce platforms run by the acquirer’s group in India, which may affect intra-platform competition between brands/ sellers. The CCI accordingly observed that if any anti-competitive conduct results from any exclusive arrangement or otherwise, it could initiate an action under Section 3 and/or 4 of the Act.

 

[1] Combination Registration No.C-2020/12/792.

Published In:Inter Alia Special Edititon - Competition Law - March 2021 [ English
Date: March 15, 2021