Walmart May Undergo A Major Test In India Following Flipkart's Legal Spat

After a legal challenge against Flipkart, the Walmart-owned e-commerce player, an Indian startup claimed losses due to sharp discounting on its products, and it's being supported by other online sellers in what could be a key test of the giant retailer's operation in India.

The country implemented stricter rules in e-commerce for international investment to prevent such massive discounts a few months ago. After that, the legal problem surfaced between Flipkart and GOQii, a health device seller.

Giving related legal documents in a court in Mumbai last month, GOQii accused Flipkart of discounting its devices by about 70% of the retail price, higher than the agreement between both sides.

However, the company denied the allegations, saying that it wasn't responsible for discounts determined by third-party sellers on its site.

Due to this legal problem, many small traders, as well as a right-wing group close to the ruling party of Prime Minister Narendra Modi, became worried. They believe that Amazon, Flipkart, or some other companies use deep discounts to lure consumers to their sites with the hope that they will also buy other items.

This GOQii's case could become bigger. According to Reuters, The All India Online Vendors Association revealed that they have plans to join against Flipkart with support of about 3,500 online sellers they represent.

According to IDC, in December last year, in the wearables market of India, the second-largest player was GOQii with 19% of market share. The biggest one was a Chinese brand, Xiaomi. Samsung was a smaller player.

In another statement, Flipkart claimed that it took legal compliance seriously and follow the law of India.

Flipkart vs GOQii

The legal dispute between GOQii and Flipkart was related to two of GOQii's health devices allowing users to keep track of exercise measurements like heart rates or the number of steps walked.

Vishal Gondal, the Chief Executive of GOQii, told Reuters that in September, the company signed a deal with the Flipkart unit. It allows the firm to sell two wearables mentioned devices at the after–discount-price from Rs 1,999 to Rs 1,499.

However, GOQii found out that Flipkart sold the devices for Rs 699 and Rs 999 on its website. GoQii then wrote to Flipkart, saying that the company gave unauthorized discounts which resorted to predatory pricing and violated the agreement.

According to Shardul Amarchand Mangaldas, Flipkart's law firm, the company was only a business-to-business wholesale venture and sold products to re-sellers. It said that Flipkart doesn’t have control over prices, re-sellers do, and the company reserves "the right to institute actions for defamation. both civil and criminal."

However, GOQii's Gondal said that he owned e-mails from employees of Flipkart and WhatsApp messages. They indicate that Flipkart did know and involve in discounting goods via its website. He refused to share the details with Reuters because the court case is still ongoing.

The customers of GOQii blamed the startup on cheating them after seeing the cheaper Flipkart’s prices. Hence, around 500,000 orders of the device were canceled. GOQii was evaluating financial damages planning to find from the court. Gondal stated that this case was a survival matter. Taking on such a multi-billion-dollar firm is not easy.

In temporary relief, the court required the sellers, who are involved in the case also, to remove those Flipkart's wearable devices.

The struggles of Walmart

In February, the new rule implemented in India for foreign investment bothered Amazon and Flipkart. They prohibited firms from selling goods via companies that have equal interest. They also made those firms stop pushing their sellers to exclusively sell products on their own websites.

That policy had an adverse impact, though, especially for Walmart.  A few months ago, by funding $16 billion in Flipkart, it had closed its largest deal. India's government, hence, have to focus on online discounts.

Swadeshi Jagran Manch is Rashtriya Swayamsevak Sangh's economic wing and Modi's ruling party's Modi's ruling party. It said that they would discuss more the legal dispute with India's officials. Co-convenor of SJM, Ashwani Mahajan, also stated that they were standing behind every business and small trader that suffer online.