Flipkart’s latest round of investments comes at a time when the government’s proposed changes to existing laws are trying to tighten the screws surrounding FDI.
The Flipkart Group announced Monday that it had raised $ 3.6 billion in funding. In addition to Walmart, the fundraising campaign also included the participation of state funds, private equity and crossovers.
The round was led by GIC (a Singaporean sovereign wealth fund), Canada Pension Plan Investment Board (CPP Investments), SoftBank Vision Fund 2 and Walmart, together with investments from the sovereign wealth fund DisruptAD, Qatar Investment Authority, Khazanah Nasional Berhad, Tencent, Willoughby Capital, Antara Capital, Franklin Templeton, and Tiger Global. The investment values the company at $ 37.6 billion.
“With this development, Flipkart will continue to invest deeper in people, technology, supply chain and infrastructure,” the company said in its press release announcing the round. “Through its expanding grocery and last-mile delivery programs, the group will also be working with Kiranas to help them digitize and grow,” the company added.
Flipkart’s subsidiaries include the logistics and supply chain arm Ekart and Shopsy, a new one started service on a reseller model using Flipkart’s catalog. Flipkart is also the majority shareholder in the PhonePe payment app.
E-commerce regulation looms
The investment round, one of the largest to date in the e-commerce space, is taking place despite the fact that online retailers are grappling with looming e-commerce regulations that hit the core of their business model. The 2020 draft amendment to consumer protection (e-commerce) legislation tightens the screws on FDI, which only e-commerce companies that run their own inventory can get. Flipkart and Amazon have consistently developed corporate structures and ownership structures for sellers like RetailNet and Cloudtail that allow them to act as “marketplace” entities even when they have a lot of control over the inventory and marketing of these third parties.
“Affiliates and Affiliates” cannot be sellers on e-commerce platforms such as Flipkart and Amazon, and flash sales that are strictly controlled by platforms are prohibited. Flash sales are often organized by Flipkart, draw the fire by stationary unions like the Confederation of All India Traders, who call this practice deceptive.
In addition, e-commerce sites need to take steps to hire compliance, node and complaint officers, avoid selling counterfeit goods, and clearly identify the origin of imported products. Additionally, platforms cannot use their name to advertise products or promote sales to sellers. Sponsored offers must be clearly delineated and invoices must have the seller name and platform name of the same size.
Antitrust investigation on
Meanwhile, the Competition Commission of India (CCI) is trying to investigate Flipkart and Amazon for allegedly undermining FDI standards. The investigation was initiated following a complaint from Delhi Vyapar Mahasangh (DVM), an MSME (micro, small and medium-sized enterprise) smartphone union.
The Amazon and Flipkart investigation was directed to investigate four alleged violations:
- Exclusive introduction of mobile phones
- Promote preferred sellers on their websites
- Deep discounting practices
- Prioritize some seller offers over others
Timeline of events
January 13, 2020: The CCI opened an investigation against Amazon and Flipkart in January last year. However, the Karnataka HC closed that investigation after Amazon and Flipkart challenged it, saying the CCI had no evidence that the two companies were harming competition.
October 26, 2020: The Supreme Court declined to hear a lawsuit filed by the CCI that sought to remove Karnataka HC’s stay of its investigation against Amazon and Flipkart. Instead, the top court instructed the HC to rule on the matter within six weeks.
June 11, 2021: The Karnataka HC rejected requests from Amazon and Flipkart to end the CCI investigation into the companies’ business practices, another said report from Reuters.
June 15, 2021: Reuters reported that CCI expedites the newly opened investigation. People familiar with the matter told the news agency that CCI intends to request information “as soon as possible” from the two e-commerce giants.
June 17, 2021: Both Amazon and Flipkart have challenged the Karnataka HC’s decision, Reuters reported. In Flipkart’s latest June 16 appeal, the e-commerce company argued that the court’s decision to allow the investigation to reopen was “flawed and should be suspended,” the report said. “Irreparable damage will be done to the complainant if the investigation is continued up to the present complaint,” said the Flipkart file, as quoted by Reuters. Amazon has filed a similar complaint and both cases are likely to be negotiated by a two-person panel this week, the report added.