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Walmart-Flipkart Deal: Traders’ Body CAIT To Launch 90-Day Nationwide Agitation

The Confederation of All India Traders, traditionally pro-BJP, has demanded that the Modi government scrap the deal, and has already called for a ‘Bharat Trade Bandh’ on 28 September.
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The Confederation of All India Traders (CAIT) — a traders’ body that has traditionally been pro-BJP and its policies — is stepping up its protest against the $16-billion Walmart-Flipkart deal and foreign direct investment (FDI) in retail.

On 5 September, the CAIT announced that it would begin a 90-day nationwide agitation programme — from 15 September — to raise awareness about the impending doom for the small domestic traders and retailers. The agitation will include protest demonstrations, dharnas, door-to-door campaigns, conferences and workshops to be held at different cities across India — beginning from Delhi.

The traders’ body is demanding — just like other traders’ associations in the country — that the Modi government junk the deal as it would swallow up domestic retail trade, especially small traders and manufacturers.

The CAIT has already given a call for a one-day Bharat Trade Bandh (nationwide trade shutdown) on 28 September to all its affiliated shops and commercial establishments — which the association claims are around six crore in number.

Speaking to Newsclick, CAIT general secretary Praveen Khandelwal said, “We are demanding that the government immediately interfere and scrap the deal. We have also been in touch with the government regarding the e-commerce policy and we have made it clear that we will accept only a transparent e-commerce policy on FDI and a strong regulator for monitoring the compliance.”

“We will continue with our agitation and once the government stance is known to us, we will take stock and formulate our strategy accordingly,” he said.

On 2 July, lakhs of shopkeepers and traders under the (CAIT) had held protests at several places throughout the country.

Nearly all traders’ organisations in the country have been vehemently opposing the takeover of Flipkart — India’s largest e-commerce company, which started out as a domestic company — by American multinational Walmart, the world’s largest brick-and-mortar (offline) retailer.

Walmart announced its acquisition of 77 per cent stake in Flipkart on 9 May.

On 8 August, the Competition Commission of India (CCI) approved the Walmart-Flipkart deal — despite a number of complaints lodged by several traders’ organisations about Flipkart’s malpractices that distorted competition and violated FDI norms. These malpractices include deep discounting, predatory pricing and preferential treatment to specified sellers in Flipkart’s online marketplaces. Traders’ groups argued that the Walmart-Flipkart deal would wipe out domestic traders and retailers.

In fact, the Delhi High Court on 30 July issued notices to Amazon, Flipkart and the central government — acting on a public interest litigation (PIL) by Telecom Watchdog, a non-governmental organisation — over these violations. The matter is listed for hearing on 19 November.

But the ‘fair trade regulator’ said the deal was “not likely” to have an adverse impact on market competition even as it washed its hands off the complaints about the competition-distorting practices. The CCI said these complaints “may merit policy intervention” but have “no nexus to the competition dimension” of the acquisition and thus fall beyond the scope of the Competition Act 2002, which means they cannot be examined by the Commission.

The order was slammed by the traders’ groups and associations — including the All India Online Vendors’ Association (AIOVA), Joint Action Committee Against Foreign Retail and E-Commerce, and CAIT — which said they would challenge the order in court. Last month, the CAIT filed a petition in the National Company Law Appellate Tribunal (NCLAT) against the CCI’s approval.

Traders point out the Walmart-Flipkart deal is nothing but a back-door entry for the American retail behemoth into multi-brand retail in India, where FDI is capped at 51% — through the route of e-commerce. Walmart had earlier attempted to enter multi-brand retail in the country in 2007.

However, the FDI rules for e-commerce — as per guidelines issued by the Department of Industrial Policy & Promotion for via Press Note 3 (2016) — allow 100% FDI under automatic route in the ‘marketplace’ model while no FDI allowed in the ‘inventory-based’ model of e-commerce. The FDI rules also mandate that the sales volume from a single seller, or its group companies, cannot exceed 25 per cent of the total sales volume.

The ‘marketplace’ model is when a company only provides an online platform and acts as a facilitator between buyer and seller, which is how Amazon entered India, for example. The ‘inventory-based’ model means a company selling its own inventory of goods online.

So Flipkart’s acquisition is a way for Walmart to circumvent these restrictions under the garb of the ‘marketplace’ model — given that companies like Flipkart and Amazon are already doing it.

Although meant to operate as ‘marketplaces’, Flipkart and Amazon have created a number of “name-lending” companies to act as sellers and also through “controlled sellers” that source inventory in bulk and sell them online.

Given that Walmart is the world’s largest offline retailer, the MNC can source the cheapest material globally and sell its inventory on the platform of Flipkart, which would be cheaper than the products by Indian retailers, thus destroying competition.

As the CAIT said in a press statement dated 6 September, the Walmart-Flipkart deal will “destroy the retail trade of India as Walmart will be using e-commerce platform to flood the retail market with goods sourced from all over the globe. Not only the traders but even the domestic manufacturing sector will be adversely affected to a great extent.”

As an earlier public statement of protest against the Walmart-Flipkart deal — endorsed by now by more than 100 unions, organisations and activists — said, “India’s domestic digital retail industry will of course suffer by the domination of these two US MNCs (Walmart and Amazon). But worst affected will be small brick-and-mortar retail stores accounting for over 90% of the Indian retail sector, SME manufacturers, small delivery companies and suppliers of goods including farmers whose margins will be ruthlessly squeezed, with their behaviour digitally-controlled. Walmart is well-known for its global supply chain, especially of cheap goods from China, which means local manufacturers and suppliers will suffer deep hits.”

It might even lead to a colonial-style deindustrialisation of the Indian economy, as economist Prabhat Patnaik has said.

What’s more, recently there have been reports of Chinese e-commerce behemoth Alibaba being in talks with Reliance Retail to set up a “behemoth in the digital marketplace” while expanding Alibaba’s physical retail businesses in India as well. This means the country could soon be at the mercy of a retail oligopoly, as Newsclick has pointed out before.

The CAIT press statement, too, added that “the retail trade will be squeezed in few hands which will lead to monopoly and crony capitalism.”

 

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