Walmart's business in India is now in peril as it faces off with a domestic tech startup in a legal dispute, with the case scheduled to be heard at the end of this week. The outcome of the lawsuit against Walmart's Flipkart unit could have wide repercussions in how the company will operate its business moving forward. The outcome could also affect other businesses in the country as well, including Amazon.com and other e-commerce websites.
Fitness technology firm GOQii, which was founded by former Indiagames CEO Vishal Gondal, filed a lawsuit against Flipkart alleging unfair marketing practices. The smart and health watch seller alleged that Flipkart has been practicing predatory pricing online, which has unfairly cost its competitors thousands of dollars in lost revenue.
The suit came just months after India had imposed stricter rules for foreign investments, specifically for foreign e-commerce firms operating in the country. The policy introduced in February prohibited foreign companies from selling products through firms they have an equity interest in. It also banned companies from requiring resellers to sell their products exclusively.
The lawsuit, which was filed in a Mumbai court late last month, stated that Walmart had deliberately offered its devices at a 70 percent discount from the retail price. The discount was apparently against what the companies had agreed to in a prior agreement.
GOQii's CEO mentioned in an interview that his company had signed an agreement with Flipkart that limited the price it could sell its devices. GOQii found out last month that the website was selling its products at a significantly low price, prompting it to take immediate action.
According to GOQii, large companies such as Amazon and Walmart do offer unrealistic discounts, which cost them millions of dollars in losses, to attract customers to their websites in the hopes that they will purchase other goods. Various smaller companies and operators within the country had previously launched their own complaints against these companies' predatory pricing.
Walmart's Flipkart unit has so far denied any wrongdoing and explained that they actually have no control over how their third-party sellers price their products. The company stated that it takes legal compliance very seriously and that it has been following all Indian laws. Flipkart also mentioned that it is currently in talks with its suppliers to come to a quick resolution on the matter.
If GOQii succeeds in its legal fight, smaller traders and other startups could launch their own suits against major marketplaces for unfair predatory pricing. The win could eventually snowball and change the entire e-commerce landscape in India.
