Amazon-Future: What the CCI order means for Amazon, Future group, and Reliance Industries

The Competition Commission of India (CCI) order imposing a fine of Rs 202 crore on Amazon on December 17 added another twist to the Amazon-Future saga that has been going on before various courts since October 2020. Even after more than a year since the dispute began, the corporate-legal saga remains on the boil.

The convoluted tussle between the US-based Amazon and Kishore Biyani-led Future group saw many rounds of courtroom battles and has affected several other parties, including an Indian confederation of sellers, a lender, and also another retail giant of India.

The CCI’s order now has kept its approval for the 2019 investment deal between the two companies in abeyance noting that the commission may need to take a fresh look at the arrangement between the parties for approval.

The CCI also said that Amazon made “false and incorrect statements” while seeking the body’s approval for its investment deal with Future group firm Future Coupons Pvt Ltd. The American retailer also “suppressed actual scope” of the arrangement, the antitrust watchdog said, referring to Amazon’s strategic interest in Future group’s listed company Future Retail Ltd.

Through this investment, Amazon acquired not only a 49% stake in Future Coupons but also certain benefits in terms of right of first refusal, among other things. The clauses in the agreement have also placed a ban on the Future group from entering into any deal with a list of entities which included Reliance Industries. It was this clause that Amazon cited while seeking to block the asset sale agreement between India’s top two retailers, Reliance Retail and Future Retail.

The question on the minds of many then is, how does this CCI order affect the legal proceedings and the stalled deal?

CCI order and what it means for Amazon:

Interestingly, while the CCI’s move to keep its previous approval in abeyance is by and large unprecedented, it is pertinent to note that the approval has not been quashed.

The proceedings before CCI took place after Future Coupons Pvt Ltd filed a complaint of wrongdoing against Amazon. This plea urging the CCI to reconsider its approval also found support from the Confederation All India Traders as well as some independent directors of Future Retail. The result of a fresh reconsideration of the 2019 deal may go either way and chances of Amazon securing the approval even after this initial jolt remain 50-50.

In the meantime, however, an appeal may be expected to be filed by Amazon before the National Company Law Appellate Tribunal against the CCI’s December 17 ruling as the natural next step. The possibility of Amazon approaching either the Delhi High Court or the Supreme Court directly is slim but cannot be ruled out.

Pending arbitration proceedings before SIAC:

The CCI order will not have a direct impact on the international arbitration proceedings pending before the Singapore International Arbitration Centre between Amazon and Future group. The tribunal, which is scheduled to meet in January, has full discretion to proceed with or pause the proceedings after the development of December 17 is made known to it.

The tribunal is tasked with deciding the dispute concerning the impending Future-Reliance merger in the light of the Amazon-Future deal of 2019 and the specific clause barring Future from dealing with Reliance Industries. A suspension of approval by one Indian regulator may not preclude the tribunal from deciding the dispute before it in accordance with the arbitration laws and the arbitration agreement that both Amazon and Future group consented to back in 2019.

It has been seen in the past in the same case that the observations and findings of an Indian court have little bearing on proceedings before the tribunal. Despite the findings of a single-judge bench of the Delhi High Court noting, in December 2020, that the agreement between Amazon and Future Coupons cannot be conflated with the agreement Future Coupons has with Future Retail in the capacity of its promoter, the SIAC tribunal ruled to hold Future Retail a valid party to the agreement with Amazon.

Frozen merger between Future group and Reliance:

The CCI’s order does nothing to “de-freeze” the asset sale deal between the top two retailers of India even as Future Retail struggles to keep afloat.

This deal, which was stayed by an emergency arbitrator under the SIAC proceedings in October 2020, subsequently received almost all the requisite regulatory approvals in India on applications by Future Retail. The move by the Biyani camp to seek these approvals despite the tribunal’s stay did not hold ground before the court, though.

The Delhi High Court’s single-judge bench had rebuked Future group and its key managerial persons for wilfully disobeying the tribunal’s order. An appeal against this order remains pending. Over at SIAC, the emergency tribunal’s stay on the deal was affirmed by the duly constituted tribunal which is now holding regular proceedings.

In the light of the Supreme Court’s judgment of August 2021, no authority or regulatory body can pass any final orders concerning the Future group-Reliance merger deal till the issue is resolved in arbitration.

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