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Tuesday, January 25, 2022

India scares Amazon to suspend future group deal for 2019, citing information suppression

NEW DELHI. On Friday, India’s antitrust agency suspended Amazon.com’s 2019 deal with Future Group, which could thwart attempts by the American e-commerce giant to block the sale of Future’s retail assets to the Indian market leader.

The regulator ruled that the American company withdrew information while trying to get regulatory approval for an investment in the Indian retail chain Future Group two years ago.

The Competition Commission of India (CCI) decision could have far-reaching implications for Amazon’s legal battle with now-alienated partner Future.

Amazon has successfully leveraged the terms of its $ 200 million investment in Future for several months in 2019 to block an Indian retailer’s attempt to sell Reliance Industries’ retail assets for $ 3.4 billion.

The 57-page order from the regulator says it deems it “necessary to re-examine the combination (trade),” adding that its approval from 2019 “remains pending” until then.

The CCI order said Amazon “hid the actual volume” of the deal and made “false and incorrect statements” while seeking permits.

“Approval is suspended. This is absolutely unprecedented, ”said Sveta Dubey, a partner at the Indian law firm SD Partners, who previously worked at the Chamber of Commerce and Industry.

“The order appears to have taken on new powers for the CCI to delay approval of the combination,” she added.

With antitrust approval on the 2019 Future deal now on hold, it could undermine Amazon’s legal standing and retail ambitions, and make it easier for Reliance, the country’s largest retailer, to acquire Future’s number two, say people familiar with the dispute.

CCI also imposed a fine of about Rs 2 billion ($ 27 million) on the American company, adding that Amazon would have time to resubmit information to obtain permits, the CCI added.

However, Future Group is unlikely to partner with Amazon if it tries to re-apply for antitrust clearance following the CCI decision, a source with direct information told Reuters.

The Indian company is also set to take a CCI decision on Friday in various legal forums to argue that Amazon has no legal basis to challenge the sale of its assets, the source added.

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Future and Reliance did not respond to a request for comment. Amazon said it is reviewing the order “and will decide in due course on its next steps.”

Retail battle

The dispute over Future Retail, which has more than 1,500 supermarkets and other retail outlets, is the most hostile hotbed of fierceness between Jeff Bezos’s Amazon and Reliance, run by India’s richest man, Mukesh Ambani, as they try to gain the upper hand in attracting retail consumers.

Struck by the COVID-19 pandemic, Future decided last year to sell its retail assets to Reliance for $ 3.4 billion, but Amazon managed to successfully block the sale through legal action.

Amazon cited a breach of contract by Future, claiming that the agreed 2019 payment terms of $ 200 million for a 49 percent stake in Future’s gift voucher block prevented its parent company, Future Group, from selling its Future Retail Ltd business to certain competitors, including Reliance.

CCI’s review of the deal began after Future, which denies any wrongdoing, complained, saying Amazon had made conflicting statements in various legal forums about the intent of the 2019 transaction.

In June, CCI told Amazon that a US firm in 2019 explained its interest in investing in Future’s gift voucher block as a means to close gaps in India’s payments industry. But later, as CCI reported, Amazon revealed in other legal forums that its investment in Future was based on obtaining special rights to Future Retail.

In Friday’s order, CCI said Amazon “deliberately thwarted the true scope and purpose of the deal.”

On the eve of the CCI decision, Amazon denied withholding any information and warned that Future’s bid to cancel the 2019 deal to allow Reliance to strengthen its position would “further limit competition in the Indian retail market.”

Aditya Kalra

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