Retail: Amazon made “false and incorrect statements”: why CCI revoked the Amazon-Future agreement and penalized the American e-commerce giant

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Representative image. | Photo credit: iStock Images

Highlights

  • Claiming that Amazon made “false and incorrect statements” when it sought approval of the 2019 agreement with Future Group, India’s Competition Commission (ICC) made Amazon’s plight worse by inflicting it a penalty of Rs 202 crore.
  • The ICC said the company founded by Jezz Bezos had concealed “the real purpose and details of its agreement with Future Group” via “false representations and the removal of material facts”.
  • Amazon responded to the ICC order with a statement which read: “We are reviewing the order placed by the Indian Competition Commission and will decide on the next steps in due course.”

The battle between Amazon and Mukesh Ambani’s Reliance Retail for dominance of India’s retail sector took a new turn on Friday when the Indian antitrust regulator suspended the US e-commerce giant’s 2019 deal with Future Group, which could seriously undermine Amazon’s ambitions to derail the sale of Future. business assets at Reliance.

Claiming that Amazon made “false and incorrect statements” when it sought approval of the 2019 agreement with Future Group, India’s Competition Commission (ICC) has made Amazon’s plight worse by inflicting a penalty of 202 crore rupees.

The ICC said the company founded by Jezz Bezos had concealed “the real purpose and details of its agreement with Future Group” via “false representations and the removal of material facts”.

What’s the background?

The dispute dates back to August 2020 when the Future Retail Group led by Kishore Biyani expressed its intention to “sell off the retail and wholesale business” of its supermarket chain, its food supply unit, its retail and wholesale business. clothing supermarket and its logistics and warehousing units. to Reliance Retail, a subsidiary of Reliance Industries.

However, Amazon, as an investor in Future Coupons – a shareholder in Future Retail – argued that the deal would amount to a breach of contract it had with Future Coupons, arguing that it had put in an option ” purchase ”which allowed him to buy all or part of the shareholder company of Future Retail within three to ten years following the initial agreement of August 2019.

Amazon submitted Future Retail to arbitration by the Singapore International Arbitration Center (SIAC) on July 12, 2020. SIAC issued an emergency award in favor of Amazon, suspending the sale of Future Retail’s assets to Reliance in October of last year. Future Retail approached the Delhi High Court, alleging that Amazon was illegally interfering with the merger.

The High Court initially said it would not take action to stop the deal, but refused to prevent Amazon from arguing before statutory authorities, thereby denying Future Group’s request to ban the US company. any interference.

The court’s submissions were challenged by Amazon, and in March this year the Delhi High Court upheld the SIAC order, suspending the Reliance-Future deal. Only days later, however, a Delhi High Court division bench suspended the previous order.

Amazon then took the case to the Supreme Court. And in August of this year, the Supreme Court ruled the SIAC interim award valid and enforceable under Indian law. Future Retail responded by saying it would use all available avenues to appeal the SC order.

What did the CCI find?

In its 57-page order, the ICC, referring to the Amazon-Future agreement, deemed it “necessary to re-examine the reconciliation (of the agreement) adding that its approval in 2019” would remain on hold “until the.

When Amazon bought a 49 percent stake in Future Coupons, a promoter of Future Group which in turn had a 9.82 percent stake in Future Retail, it was done using an investment structure at two entities. This meant that the deal indirectly gave Amazon a 4.81% stake in Future Retail, one of the largest players in the retail segment in India.

ITC said Amazon’s reasoning for its initial investment was that it saw commercial potential in future coupons. “However, Amazon’s internal correspondence clearly shows different objectives for considering the combination (i.e. ‘pied-à-porte’ in the Indian retail sector, secure retail rights future which are considered strategic by Amazon and commercial agreements between the retail business of Future Group and Amazon, ”the order of the ICC read.

The order also includes a letter sent by Amazon India Chief Legal Officer and General Counsel Rakesh Bakshi to Amazon Founder Jeff Bezos in July 2019 to discuss the two-entity investment structure that would allow for ” invest in Future Retail.

“The number of Future Retail shares to be held by Future Coupons has been calculated such that Amazon can indirectly hold the same number of Future Retail shares,” the letter said. A 25 percent premium that Amazon paid over the Future Retail share price when structuring the deal also earned it strategic rights and the option to call.

Accusing Amazon of covering up those details which the ICC says describe the real motives for the deal, the regulator’s order says: (Competition Act, 2002. “

Amazon responded to the ICC order with a statement which read: “We are reviewing the order placed by the Indian Competition Commission and will decide on the next steps in due course.”


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