Walmart faces major India test over unit Flipkart’s legal spat with startup

Widespread opposition over Walmart’s acquisition of Fliplart has prompted changes in India’s e-commerce investment rules. (AFP)
Updated 04 June 2019

Walmart faces major India test over unit Flipkart’s legal spat with startup

  • GOQii sued Flipkart last month in a Mumbai court, alleging its devices were discounted by around 70 percent to the retail price
  • GOQii is a seller of smartwatch-type health devices

NEW DELHI: An Indian startup’s legal challenge against a Walmart unit claiming losses caused by sharp discounting of its products is winning support from other online sellers, in what is shaping as a key test of how the giant retailer operates in the country.
The legal tussle between GOQii, a seller of smartwatch-type health devices, and Walmart’s Flipkart unit, comes just months after India imposed stricter rules for foreign investment in e-commerce that were aimed at deterring such sharp discounts.
GOQii sued Flipkart last month in a Mumbai court, alleging its devices were discounted by around 70 percent to the retail price, much more than the two sides had agreed to, legal documents related to the case showed.
The case will next be heard on Friday. Flipkart has denied any wrongdoing, saying it was not responsible for any discounts which are only determined by third-party companies which sell on the e-commerce website.
The legal spat has brought to the fore concerns long raised by small traders and a right-wing group close to Prime Minister Narendra Modi’s ruling party. They say companies such as Flipkart and Amazon.com deeply discount some products by burning billions of dollars to lure customers onto their sites in the expectation that they will also buy other goods.
“It will set a precedent if the final decision goes against Flipkart for predatory pricing,” said Salman Waris, a partner at TechLegis Advocates & Solicitors.
“Small traders’ associations and other startups may take other marketplaces adopting deep discounting strategy to court.”
The GOQii case could snowball. The All India Online Vendors Association told Reuters in a statement it plans to file a plea to join GOQii’s case against Flipkart on behalf of 3,500 online sellers it represents.
Flipkart said in a statement it takes legal compliance seriously and was compliant with Indian law. “We are engaged with the supplier to come to a swift resolution,” it said.
With a 19 percent market share, GOQii was the second-biggest player in India’s so-called wearables market last year, data from industry tracker IDC in December showed. The market is dominated by China’s Xiaomi, with Samsung a small player.
GOQii’s dispute with Flipkart centers around two of its wearables devices that allow users to track exercise measurements, such as the number of steps walked, or heart rates.
GOQii’s Chief Executive Vishal Gondal told Reuters the firm signed an agreement in September with a Flipkart unit, allowing it to sell the two GOQii devices at a price not below 1,999 rupees and 1,499 rupees, after discounts.
But GOQii last month found Flipkart’s website showed the devices on sale for 999 rupees and 699 rupees. The company wrote to Flipkart, saying it was giving “unauthorized” discounts and resorting to “predatory pricing,” violating the agreement, its legal notice showed.
Flipkart was just a business-to-business wholesale venture which sells good to re-sellers, its law firm, Shardul Amarchand Mangaldas, said in its response that was seen by Reuters.
That’s central to how Flipkart operates — as India prohibits foreign e-commerce firms from stocking and selling their own inventory on its websites, their wholesale units purchase goods in bulk and sell them to re-sellers. Those re-sellers use Flipkart’s own website to sell some of those goods to customers.
Flipkart does not control or influence prices which were determined by such re-sellers, the law firm said, adding that it reserves “the right to institute actions for defamation, both civil and criminal.”
GOQii’s Gondal, however, said he was in possession of WhatsApp messages and emails from Flipkart’s employees that show the company was aware and involved in discounting products on its website. He declined to share those with Reuters, citing the ongoing court case.
Gondal said about 500,000 device orders were canceled after GOQii’s other customers accused the startup of cheating them when they saw cheaper prices on Flipkart. The company was also assessing monetary damages it plans to seek from court.
“It’s a matter of survival. It’s not easy to take on a multi-billion-dollar company,” Gondal said.
In interim relief, the court has ordered the sellers, who are also party to the case, to remove the wearable devices from the Flipkart platform.
India’s new foreign investment rules introduced in February were troubling for Flipkart and Amazon as they barred companies from selling products via firms in which they have an equity interest and stopped them from pushing their sellers to sell exclusively on their websites.
The policy was aimed at deterring deep discounts and helping small traders, but it shocked Walmart as it had just months ago closed its biggest deal by investing $16 billion in Flipkart.
Swadeshi Jagran Manch (SJM), the economic wing of the Rashtriya Swayamsevak Sangh, the ideological parent of Modi’s ruling party, said on Tuesday the government must investigate online discounts.
“We are standing behind any small trader, businesses who suffer online,” said Ashwani MaHajjan, SJM’s co-convenor, adding it would discuss GOQii’s legal case against Flipkart with government officials.


$8bn blow to Erdogan as investors flee Turkey

Updated 09 July 2020

$8bn blow to Erdogan as investors flee Turkey

  • Overseas holdings in Istanbul stock exchange are at lowest in 16 years

ANKARA: Foreign capital is flooding out of Turkey in a massive vote of no confidence in President Recep Tayyip Erdogan’s economic competence.
Overseas investors have withdrawn nearly $8 billion from Turkish stocks since January, according to Central Bank statistics, reducing foreign investment in the Istanbul stock exchange from $32.3 billion to $24.4 billion.
As recently as 2013, the figure was $82 billion, and foreign investors now own less than 50 percent of stocks for the first time in 16 years.
“Foreign investment has left Turkey for several reasons, both internal and external,” Win Thin, global head of currency strategy at Brown Brothers Harriman, told Arab News.
“Externally, investors fled riskier assets like emerging markets during the height of the coronavirus pandemic. Some of those flows are returning, but investors are being much more discerning and Turkey does not seem so attractive.”
In terms of internal factors, Thin said that Turkish policymakers had made it hard for foreign investors to transact in Turkey. “This includes real money clients, not just speculative.
“By implementing ad hoc measures to try and limit speculative activity, Turkey has made it hard for real money as well. Besides these problems, Turkey’s fundamentals remain poor compared to much of the emerging markets.”
Erdogan allies claim international players are manipulating the Istanbul stock exchange through automated trading, and have demanded action to make it difficult for them to trade in Turkish assets.
Goldman Sachs, JPMorgan, Merrill Lynch, Barclays and Credit Suisse were banned this month from short-selling stocks for up to three months, and this year local lenders were briefly banned by the banking regulator from trading in Turkish lira with Citigroup, BNP Paribas and UBS
JPMorgan was investigated by Turkish authorities last year after the bank published a report that advised its clients to short sell the Turkish lira.
MSCI, the provider of research-based indexes and analytics, warned last month that it may relegate Turkey from emerging market status to frontier-market status because of bans on short selling and stock lending.
With the market becoming less transparent, overseas fund managers, especially with short-term portfolios, are unenthusiastic about the Turkish market and are becoming more concerned about any forthcoming introduction of other liquidity restrictions.
The exodus of foreign capital is likely to undermine Turkey’s drive for economic growth, especially during the coronavirus pandemic when employment and investment levels have gone down, with the Turkish lira facing serious volatility.