Moneycontrol PRO
UPCOMING EVENT:Special webinar on Highlights of global investing in 2021 and what lies ahead' at 2 pm on 21st January, 2022. Register Now!
you are here: HomeNewsBusiness

Why CCI should revoke the Amazon-Future Coupons deal. Legal experts weigh in

The competition regulator has the grounds and powers to revoke the deal because Amazon had concealed and misrepresented facts, experts said. Moreover, the way in which the US company acquired indirect rights and veto power over a listed company falls foul of Indian laws.

November 08, 2021 / 03:45 PM IST
Representative Image

Representative Image

If Amazon has concealed or misrepresented facts to the Competition Commission of India (CCI), the regulator has grounds and powers to revoke the America company’s deal with Future Coupons, said legal experts.

On Sunday, the independent directors of Future Retail wrote to CCI requesting it to revoke the approval it had given to the Amazon-Future Coupons (FCPL) deal in November 2019 alleging that the US-based e-commerce firm had not told the regulator it was investing in the business of Future Coupons to acquire strategic, material and special rights over Future Retail Ltd.

According to Ravisekhar Nair, Partner, Economic Laws Practice, the combination review or merger control process under the Competition Act is inherently 'forward looking'.

“The CCI reviews transactions that are notified to it to analyse whether or not such a transaction can result in any anticompetitive outcomes. This is akin to crystal ball gazing and therefore it is heavily dependent on the parties providing full and true disclosure of all aspects of the transaction. If there is a gap in the information provided, whether deliberate or inadvertent, it can have an impact on the CCI’s review,” he added.

“The approval can be revoked once it is established that the information in question was necessary or relevant for the CCI’s review under the provisions of the Competition Act, 2002,” said Nair.


In 2019, Amazon had acquired indirect control and veto powers over listed Future Retail Ltd with a multi-step transaction that sought to evade Indian laws.

First, Future Retail, Future Coupons, and certain promoter entities of the Future Group entered into an agreement under which the retail firm was required to get the nod of Future Coupons for selling its assets, among other things.

In the second step, Amazon agreed to invest Rs 1,431 crore to buy a 49 percent stake in Future Coupons. Under the terms of this deal, Future Coupon had to get Amazon’s consent before it okayed any proposal of Future Retail. Future Coupons owns 9.8 percent in Future Retail.

However, in its application to CCI, Amazon had misrepresented to the commission that its rights over Future Retail were “only investment protection rights,” said the letter written by the independent directors.

Further, Amazon specifically told the commission that the rights over Future Retail would not be exercised by Amazon directly and would only be exercised by Future Coupons as a shareholder of the retail company to protect the investment made in it by Amazon and Kishore Biyani companies, the letter added.

Legal experts also pointed out that Amazon in its application to the National Company Law Tribunal (NCLT) and Delhi High Court had claimed strategic as well as investment rights over Future Retail.

“While seeking CCI’s approval Amazon had mentioned that it has investment protection rights, which indicates there is a misrepresentation of the facts and hence CCI might look at revoking the deal,” said Sonam Chandwani, managing partner, KS Legal & Associates.

Though CCI since the inception of the Indian Merger Control regime in 2011, has never revoked an approval, lawyers believe that it might make an exception this time around.

Manoj Kumar, the founder of law firm Hammurabi & Solomon, too pointed out that if Amazon was found guilty, CCI was within its powers to not only revoke its earlier approval but also impose high penalties.

“The government of India should then carry out a thorough and swift investigation of such flagrant violation of FDI regulations by Amazon through its various agencies for financial crimes,” he added.

Other experts, however, said that the CCI so far in its existence has not revoked any deal, and hence, it might order a review of the deal again and might penalise the company if it is found that Amazon flouted the norms while seeking approval.

“Basis media report, I understand that CCI had issued a notice to Amazon for concealing facts in relation to the Future deal. While theoretically, CCI can revoke the deal, it has never happened, and is unlikely that it will take this measure. The watchdog would in most likelihood impose a fine on Amazon if there is a contravention of the Competition Act,” said Vaibhav Choukse, Partner, J. Sagar Associates.

CCI, according to experts, only on two occasions, has penalised companies for providing false information or non-disclosure of material information in the combination cases. If the party is found guilty, the CCI can impose a monetary penalty (maximum Rs 1 crore), direct parties to re-file the CCI notification for approval, or revoke the approval order (only in exceptional circumstances).

In any case, the two-step duck and weave by Amazon to get veto powers over a listed company without owing a share in it could well be ruled illegal since it falls foul of Indian laws.

In a 21 December 2020 judgement, Delhi High Court Judge Mukta Gupta had said that the strategic rights claimed to have been acquired by Amazon amounts to the US company acquiring control over Future Retail. This not only violated FDI rules since acquisition of shares by a foreign company in multi-brand retail requires a government nod but also triggers an open offer.

If CCI revokes the deal, it could pave the way for Future Retail’s planned sale of its assets to Reliance Retail. It was after the two companies had struck an agreement in August 2020 that Amazon moved to block the deal. Currently, the deal is stuck as Amazon and Future are mired in litigation in various fora from the National Company Law Tribunal to the Supreme Court.

(Disclaimer:  Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.)
Moneycontrol News
first published: Nov 8, 2021 03:45 pm

stay updated

Get Daily News on your Browser
ISO 27001 - BSI Assurance Mark