ETtech Explainer: Inside Amazon's victory against Future Group in Reliance deal
What's the case all about?
Back in 2020, Future Group, which owns major retail players like Big Bazaar, Food Bazaar, and Easyday, agreed to sell assets worth $3.4 billion to Amazon rival Reliance Industries as the business was hit hard during the pandemic. However, ecommerce giant Amazon had previously invested $200 million in Future Group and had a contractual right to block such a sale.
Amazon acquired a 49% stake in Future Coupons, a promoter of Future Group that holds a 9.82% stake in the group's retail arm, Future Retail. The deal implied Amazon indirectly having a 4.81% stake in Future Retail Ltd (FRL).
In October 2020, Amazon approached SIAC and obtained a stay on the Future-Reliance deal from the emergency arbitrator. The order was followed by a slew of petitions and counter-petitions between Amazon and Future Group in the Delhi High Court and in the Supreme Court. SIAC is an arbitration centre based in Singapore that handles international disputes, including those involving Indian companies. Emergency arbitration ruling is a temporary relief mechanism to hear urgent matters before the main arbitration panel is even set up.
The legal battle begins
Amazon objected to the Future Group and Reliance deal on the grounds that its investment in FCPL made it mandatory for FRL to take its consent before parting with any of its assets. Amazon has said that in its agreement with Future, Reliance Retail was specifically named as one of the entities to whom the Indian retailer could not sell its assets.
Future Retail further alleged that Amazon interfered with the Rs 23,000 crore deal with Reliance Industries and misused SIAC's interim verdict.
The Competition Commission of India (CCI) in December 2021 suspended its approval of Amazon's 2019 deal with Future, denting the US ecommerce giant's attempts to block the sale of Future's retail assets to Reliance Industries. Future Group accused Amazon of violating Indian foreign investment laws and the Foreign Exchange Management Act (FEMA) by misrepresenting facts. CCI later made a statement that Amazon suppressed information while seeking clearances for the deal.
ET had reported in November 2021 that Amazon had asked Future Group to withdraw its applications with the CCI. Amazon later filed an appeal against the CCI suspension decision at the National Company Law Appellate Tribunal (NCLAT). Next year in February, Reliance, which had not played a public role in the dispute, suddenly took control of hundreds of Future stores, citing non-payment of rent that was due.
However, Future denies any wrongdoing, saying Amazon was illegally seeking to exert control over Future's retail business and said it would face liquidation if the Reliance deal fell through.
What's at stake? Amazon has invested $6.5 billion in India. The Future partnership had helped Amazon to boost its online portfolio of grocery deliveries by integrating the Indian company's stores on its website. The recent ruling by the SIAC in favour of Amazon has hit Reliance's growth plans in India's retail market.
In a confidential legal filing, Amazon said that Reliance's consolidated position with Future "will further restrict competition in the Indian retail market."
What lies ahead?
Amazon India's legal head, Rakesh Bakshi, had asked Future Group for generous compensation in return for withdrawing its objections to the Reliance deal. In a final award issued late Thursday night, the three-member tribunal said that the Future-Reliance deal is a breach of the Shareholders' Agreement (SHA) and Share Subscription Agreement (SSA) signed between Amazon and Future Coupons Pvt Ltd (FCPL) in 2019.However, the tribunal found that even if all contractual agreements had been fully performed, Amazon would not have recovered its entire investment due to the declining financial condition of FRL.
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