The Competition Commission of India (CCI) has withdrawn approval for Amazon’s investment in Future Group which was granted in 2019, after acknowledging that essential information was hidden while asking for the approval. CCI has also slapped a penalty of ₹200 crore on the US retail giant that it has to pay in 60 days.
The e-tailer is accused of suppressing the actual scope of the 2019 deal between Future Group’s Future Coupons Private Ltd (FCPL) and Amazon, which gave the latter the option to buy Future Retail in 3-10 years. Amazon used the $200 million investment deal as leverage to oppose Reliance Industries Limited (RIL) buying $3.4 billion worth of assets of the Future group.
Keeping the previous approval in abeyance, the CCI noted in its order that “Amazon had misled the Commission to believe, through false statements and material omissions, that the combination and its purpose were the interest of Amazon in the business of FCPL.”
The antitrust body has given Amazon 60 days to give notice for the combination with true, complete and correct information, after which the Commission would look at the combination over again. Until then, the nod for the investment given by CCI would remain in abeyance.
This move by CCI is bound to affect the attempts of Amazon to hinder RIL from acquiring Future Retail’s assets. Amazon has stressed that terms of the 2019 deal prevent Future Group from selling its retail assets to Reliance Industries.
What is the Amazon-Future deal about?
- In August 2019, Amazon had acquired a 49% stake in Future Coupons for ₹1,500 crore.
- The deal gave Amazon an indirect stake of 4.81 per cent in Future Retail
- In August 2020, Future Group made a deal with RIL to sell $3.4 billion worth of assets.
- Accusing breach of contract, Amazon sent a legal notice to Future Group in October 2020.
- SIAC (Singapore International Arbitration Centre) ruled in favour of Amazon to put a stay on the RIL-Future deal.
- Future Group also applied in Delhi High Court against Amazon citing interference in its deal with RIL
- The Supreme Court of India also ruled in favour of Amazon, however, it ordered no coercive action.
CCI had found out that Amazon had not divulged relevant information about the shareholder agreement when acquiring a stake in FCPL and had therefore misinformed CCI about its purpose to obtain strategic rights over Future Retail.
The CCI order read that, “In exercise of the powers conferred under sub-section (2) of Section 45 of the Act, the Commission hereby directs Amazon to give notice in Form II within a period of 60 days from the receipt of this order, and, till disposal of such notice, the approval granted vide Order dated 28th November 2019, in Combination Registration No. C-2019/09/688, shall remain in abeyance.”
Before this, the Supreme Court of India had given two weeks’ time to Amazon to respond in the case where FCPL had filed an application alleging that Amazon had broken Indian foreign exchange laws and FDI rules while soliciting approval for the 2019 deal.
The Commission also made note of the fact that the internal emails from Amazon pointed to the possibility of the retail giant’s intention to acquire Future Retail when the foreign investment laws are relaxed and have a ‘foot-in-the-door’ in the Indian retail sector.
The order by CCI said that these emails show that Future Coupons was merely a vehicle for Amazon to acquire an interest in Future Retail.
The CCI said that “Misrepresentations and suppressions are serious challenges to the trust-based regulatory mechanism for combinations and the sanctity of the institutional framework established under the Act (Competition Act, 2002).”
Previously, Amazon had won a stay on the sale of Future Group’s assets to Reliance Industries Limited at the Singapore International Arbitration Centre. The decision was also upheld by the Supreme Court of India. Now, the suspension of the Future-Amazon deal by CCI may clear the path of RIL acquiring a stake in Future Retail