Rejection of Wal-Mart-Cornershop deal shows Mexican competition authority has teeth in e-commerce

Walmart saw its plans to buy crowdsourced, on-demand delivery marketplace Cornershop MX potentially go down the drain with the Mexican competition authority's decision to block the deal because it would likely undermine companies operating in the same markets.

In its first merger review in the digital industry, Mexico's Federal Economic Competition Commission, or Cofece, sent a message that it will take a tough stance against companies holding dominant positions in digital markets.

But the competition authority’s decision doesn’t necessarily put an end to the case, as Walmart and Cornershop MX can try to overturn the antitrust ruling in court. The companies have not responded to request for comment.

The Walmart-Cornershop deal and a probe into alleged abuse of market power in the sector of e-commerce platforms and related services were the first cases involving digital markets to reach Cofece.

Walmart’s Mexican subsidiary, Wal-Mart de Mexico, is the country's biggest retailer and operates self-service stores, membership clubs, pharmacies and online stores. Cornership is a leading online marketplace for on-demand delivery from supermarkets, pharmacies and specialty food retailers in Mexico and Chile.

In its decision to block the $225 million deal, Cofece said that after the transaction Cornershop would have incentives not to contract with Walmart’s competitors, and Walmart would also have an incentive to refuse to market its products through platforms competing with Cornershop.

Cofece also said the fact that the new company would have access to competitors’ information on their product sales could induce those competitors to leave Cornershop’s platform.

Cofece said the parties submitted a remedy proposal to allay competition concerns, but the offer wasn’t sufficient. The authority didn’t provide any details about the offer.

"The Commission decided not to authorize the [deal], since this would have the effect of hindering, diminishing, damaging or impeding competition in the market for exhibition logistics, purchase and immediate delivery of products offered by self-service stores and warehouses through web pages and apps to end users," Cofece said in a statement disclosed today.

Walmart is listed in the New York Stock Exchange. Cornershop is a private company.