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Opinion | CCI calls out Amazon’s smoke and mirrors tactics

The CCI made stinging observations against Amazon. Misrepresentations and suppressions are serious challenges to the trust-based regulatory mechanism for combinations and the sanctity of the institutional framework established under Competition Act, 2002.

December 18, 2021 / 02:16 PM IST
Amazon was born 27 years ago and is one of the oldest internet based companies that have grown massively. It is one of the Big Five companies in the U.S. information technology industry, along with Google, Apple, Microsoft, and Facebook. Jeff Bezos founded Amazon, as a marketplace for books, from his garage in Bellevue, Washington, on July 5, 1994. [Image: Reuters]

Amazon was born 27 years ago and is one of the oldest internet based companies that have grown massively. It is one of the Big Five companies in the U.S. information technology industry, along with Google, Apple, Microsoft, and Facebook. Jeff Bezos founded Amazon, as a marketplace for books, from his garage in Bellevue, Washington, on July 5, 1994. [Image: Reuters]


In a major setback to its expansion plans in India, Amazon has been called upon to resubmit its application for acquisition of a stake in Future Coupon within 60 days by the Competition Commission of India (CCI). Accordingly, the approval it had got in 2019 has been suspended on the ground that it had withheld vital information. To add to its discomfiture, the Indian competition watchdog levied a hefty and exemplary fine of Rs 200 crore on the US e-commerce company.


Amazon had acquired a 49 percent stake in Future Coupons, the promoter entity of Future Group, which in turn holds a 9.82 percent stake in Future Retail. The deal, thus, gave Amazon an indirect stake of 4.81 percent in Future Retail, which is a key player in the Indian retail market. In its application to the CCI to sanctify the deal with Future Coupons, Amazon steered clear of elaborating its real intention to acquire Future Retail. Indeed, its investment of Rs 1,500 crore in Future Coupons for a 49 percent stake was the proverbial thin edge of the wedge.


Amazon in its application almost threw a red herring — its investment in Future Coupons was to get a stranglehold of the growing cash wallet business in India in which it had considerable expertise. The CCI had taken Amazon at its face value, and cast its imprimatur on the deal as it had no potential of upsetting competition in the cash wallet business. Later, events (and Amazon’s internal documents which had been submitted to courts) proved that what Amazon was coveting was not the Future Coupon’s toehold in the wallet market, but Future Retail’s vast network of retail stores.


Thus, when Reliance Retail announced its plans to merge the ailing Future Retail with itself on fair terms, Amazon moved the Singapore arbitrator, and got a stay.


“However, the Internal Correspondence of Amazon clearly shows different purposes for envisaging the Combination (i.e., ‘foot-in-door’ in the Indian retail sector, secure rights over Future Retail that are considered as strategic by Amazon and Commercial Arrangements between the retail business of Future Group and Amazon),” the CCI order said.


In its submission to the CCI, Amazon had said that the rights it got over Future Retail were in the nature of investment protection rights. But in effect these rights were strategic and veto rights which also violated the Indian government’s foreign direct investment norms, as the Delhi High Court pointed out last year. Indian laws prevent foreign companies from controlling multi-brand retail firms in India.



The CCI, thus, made stinging observations against Amazon. Misrepresentations and suppression are serious challenges to the trust-based regulatory mechanism for combinations and the sanctity of the institutional framework established under Competition Act, 2002, it has observed in its order.


This is not the first time that Amazon has been accused of flouting Indian rules. A Reuters report earlier this year detailed how Amazon favoured big sellers and used them to manoeuvre around rules meant to protect the country's small retailers.


Amazon had questioned the CCI’s powers to call back its approval for re-examination in the absence of an express power to do so in the Competition Act, 2002. However, there are certain inherent powers of judicial and quasi-judicial bodies. One of these is to recall their own order(s) on being made aware of misrepresentations and suppressions, lest it is criticised for acquiescing in such misrepresentations and suppressions.


The CCI has been careful not in cancelling its approval for Amazon picking up a 49 percent stake in Future Coupons, but only suspending it. Time will tell if a chafing Amazon would settle for this — possible control of the mobile wallet business in India when its sights were trained at controlling the more lucrative retail business.

S Murlidharan is a chartered accountant and columnist. Views are personal.
Tags: #Amazon #CCI
first published: Dec 18, 2021 02:16 pm
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