Competition Commission freezes Amazon-Future deal, slaps Rs 202cr fine on US firm

New Delhi: In a significant development, the Competition Commission if India (CCI) on Friday suspended its more than two-year-old approval for Amazon's deal with Future Coupons and imposed a Rs 202 crore penalty on the e-commerce major for failure to furnish true and complete details about the transaction.

The ruling by CCI assumes significance amid the long-drawn bitter legal battle between Amazon and Future Group over the Indian entity's proposed Rs 24,713 crore-deal with Reliance Retail Ventures Ltd (RRVL).

Amazon has for months successfully used the terms of its investment in Future in 2019 to block the Indian retailer's attempt to sell retail assets to Reliance Industries for $3.4 billion.

Deals beyond a certain threshold require CCI nod and it is quite rare for the watchdog to suspend an approval.

In a 57-page order, the regulator noted that the contraventions of the competition law have arisen "from a deliberate design on the part of Amazon to suppress the actual scope and purpose of the combination".

Consequently, fines totalling Rs 2 crore have been imposed on Amazon.

For failure to notify the combination in the requisite terms, the watchdog has also slapped a penalty of Rs 200 crore.

The combination pertained to Amazon acquiring 49 per cent stake in Future Coupons through three levels of transactions.

With the 2019 Future deal's antitrust approval now suspended, it could dent Amazon's legal position and retail ambitions, while making it easier for Reliance - the country's largest retailer - to acquire number two player Future.

The antitrust agency noted that Amazon had failed to disclose true and complete details of the purpose of the combination, which were required to be given while seeking the approval.

CCI also said since the combination is between players who are known in the online marketplace and offline retailing and have contemplated strategic alignment between their businesses, it has decided to examine the combination afresh.

A time period of 60 days starting from the date of receiving the order has been given to Amazon to file a notice with "true, correct and complete information".

Till disposal of the notice, CCI said the approval granted for the combination on November 28, 2019 "shall remain in abeyance".

Future Group, however, is unlikely to cooperate with Amazon if it tries to reapply for antitrust clearance after the CCI's decision, Reuters reported quoting sources.

The parties involved in the combination were Amazon.com NV Investment Holdings LLC (Amazon) -- a direct subsidiary of Amazon.com Inc -- and Future Coupons.

"We are reviewing the order passed by the Competition Commission of India, and will decide on next steps in due course," an Amazon spokesperson said in a statement.

Amazon had initiated arbitration proceedings against Future Group with respect to proposed transfer of assets of Future Retail. Future Coupons told CCI that submissions made by Amazon before the regulator and the arbitrator were contradictory. Subsequently, CCI issued a show cause notice to Amazon in June this year.

The watchdog also pointed out that it has no hesitation to hold that the conduct of Amazon amounts to "suppression and misrepresentation of the purpose of the combination, which is a material particular", adding that those are in contravention of competition norms.

Confederation of All India Traders (CAIT) said the order of the CCI penalising Amazon and suspending the approval for the Future deal is a landmark move and Amazon stands fully exposed for its mal-practices, and bunch of lies at all levels together with continued violation of laws and rules of the land.

In August 2019, Amazon had agreed to purchase 49 per cent in unlisted Future Coupons, which owns 7.3 per cent equity in listed Future Retail through convertible warrants, with the right to buy into the flagship Future Retail after a period of 3 to 10 years.

In August 2020, RRVL said it will acquire the retail and wholesale business, and the logistics and warehousing business of Future Group for Rs 24,713 crore.

The scheme of arrangement entails the consolidation of Future Group's retail and wholesale assets into one entity Future Enterprises Ltd and then transferring it to Reliance Retail.

(With inputs from PTI and Reuters)