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Yet another of Walmart Inc.'s international deals has hit a regulatory snag, with Mexico's competition authority blocking the retailer's $225 million acquisition of grocery delivery application Cornershop Inc.

Mexico's Federal Economic Competition Commission said in a news release last week that the proposed deal "could generate incentives to duly displace or block competitors' access to the Cornershop platform and/or hinder the development of new platforms."

Also, the release stated, "the new economic agent resulting from the transaction would gain sufficient market power to hinder, diminish, harm or block competition in the market for logistical services for the exhibition, purchase and immediate delivery of products sold by supermarkets and membership price clubs through websites and mobile apps to final consumers."

Founded in San Francisco, Cornershop's e-commerce platform is used to deliver goods from supermarkets, pharmacies and specialty food retailers in Mexico and Chile.

Walmart announced its intent to acquire Cornershop in September. Judith McKenna, president and chief executive officer of Walmart International, said at the time that "Cornershop's digital expertise, technology and capabilities will strengthen our successful businesses in Mexico and Chile and provide learning for other markets in which we operate."

Mexico's federal economic competition law allowed Walmart and Cornershop to present the commission's board with measures addressing the identified risks to competition. However, the board said in the news release that it found their proposals "insufficient."

The companies have the right to take their cases before the Federal Judiciary Branch for review of the legality of the commission's actions, according to the release. Wal-Mart de Mexico said in a statement responding to the commission's decision that it was "analyzing the scope of this resolution and the measures we will adopt, since we are sure that this operation is positive for the competitive environment and for the consumer, and that it drives the development of e-commerce in Mexico."

In April, British regulators quashed Walmart International's plan to sell its U.K. subsidiary, Asda, to rival supermarket chain Sainsbury's for about $10 billion.

The Competition and Markets Authority's final report on the proposed merger concluded that U.K. shoppers and motorists would be worse off if the deal went through.

Stuart McIntosh, chairman of the agency's inquiry group, said its investigation found that the reduced supermarket competition would cause price increases, reduce the quality and range of products available, and create a poorer overall shopping experience.

Both Asda and Sainsbury's pledged to sell stores, cut prices and make other concessions to earn regulators' approval. However, McIntosh said, "Detailed analysis of the impact of the deal clearly showed that, overall, the merger would reduce competition in the market and is more likely to lead to price rises than price cuts."

The group also carefully considered industry developments such as increased competition from German discount grocery chains Lidl and Aldi, McIntosh said. Still, he said, these issues "did not allay its serious competition concerns about the merger."

Laura Kennedy, vice president at Kantar Consulting, said the Asda deal's collapse "definitely puts a crimp in Walmart's broader strategy to concentrate on its productive, profitable businesses [in the U.S., Canada and Mexico] and use those to fuel its growth markets [India and China]."

The retailer also ran into regulatory roadblocks in India, where its purchase of a 77% stake in Flipkart Inc. was intended to allow Walmart to sell directly to India's burgeoning middle class. But a Feb. 1 mandate enforcing India's protectionist trade regulations prohibits foreign retailers from selling products via companies in which they have an equity interest.

Still, Walmart executives have said repeatedly that the retailer is in the Indian market for the long term.

Business on 06/12/2019

Print Headline: Mexico blocks Walmart's deal for grocery delivery service

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