Approval was granted by the regulator in November 2019 for Amazon’s deal to buy a 49 percent stake in Future Coupons.
In a significant development, the Competition Commission on Friday suspended its more than two-year-old approval of Amazon’s deal with Future Coupons and fined the major e-commerce company Rs 202 crore for failing to provide correct and complete details of the deal.
The CCI decision assumes significance amid the protracted bitter legal battle between Amazon and Future Group over the proposed Indian entity’s Rs 24,713 crore deal with Reliance Retail Ventures Ltd (RRVL).
Deals that exceed a certain threshold require CCI approval and it is very rare for the regulator to suspend approval.
In a 57-page order, the regulator noted that competition law violations arose from “a deliberate design on the part of Amazon to suppress the actual scope and purpose of collection”.
Hence, fines totaling Rs 2 crore have been slapped on Amazon.
For failing to notify the group of the required terms, the watchdog also imposed a fine of Rs 200 crore.
The merger relates to Amazon obtaining a 49 percent stake in Future Coupons through three levels of transactions.
The watchdog noted that Amazon failed to disclose true and full details of the purpose of the kit, which was required to be provided while seeking approval.
“…Amazon suppressed the actual scope of the collection and made false and incorrect statements regarding BCAs (commercial trade agreements), which are intertwined in the scope and purpose of the collection,” the request said.
CCI also said that since the combination of well-known players in the online market and offline retail who have considered strategic alignment of their businesses, it decided to study the group anew.
A 60-day period of time has been given starting from the date the order was received by Amazon to provide notice that includes “true, correct and complete information”.
Until the notice is disposed of, CCI said approval given for the merger on November 28, 2019 “will remain pending.”
The parties involved in the merger are Amazon.com NV Investment Holdings LLC (Amazon) – a direct subsidiary of Amazon.com Inc – and Future Coupons.
“We are reviewing the order issued by the Competition Commission of India, and will decide on next steps in due course,” an Amazon spokesperson said in a statement.
Amazon has initiated arbitration proceedings against Future Group in connection with the proposed transfer of Future Retail’s assets. Future Coupons told CCI that Amazon’s requests to the regulator and arbitrator were contradictory. Subsequently, CCI issued a reason-of-proposal notice to Amazon in June of this year.
Furthermore, Amazon erred that its decision to pursue the merger was based on the unique business model of FCPL (Future Coupons Pvt Ltd), and that FRL (Future Retail Ltd), a company with strong financial services and a forward-looking outlook, is relevant to the combination only of A financial strength perspective to the FCPL,” CCI said.
The watchdog also noted that it did not hesitate to say Amazon’s behavior amounted to “oppression and misrepresentation for the purpose of collection, which is a particularly material matter”, adding that it is against competition rules.
Likewise, rights over FRL that were considered strategic in Amazon’s internal communications, were represented as mere investor protection rights.
“Such repetitive assertions, contrary to their actual purpose, amount to particularly false statements in substance, in contravention of the provisions in Clauses (a) and (b) of Section 44 and Clause (a) of Subsection (1) of Section 45 of the law,” the order said.
Citing internal Amazon correspondence, CCI said it clearly highlights that Amazon’s rights over the FRL “are at the heart of the negotiations and that the need for the FRL SHA (Sharing Agreement) was to achieve the stated objective of the merger.”
Aside from not providing a single notice covering all the interrelated steps of the group, Amazon also failed to provide true and complete disclosure regarding the substance of its group. “…The FRL SHA has been pursued to ensure that the FRL business becomes a strategic asset for Amazon to expand and enhance its high-speed delivery services,” CCI said.
The Association of All India Merchants (CAIT) said that CCI’s suspension of the deal is a “historic” and that “Amazon is fully exposed to its malpractice and a host of lies at all levels along with continued violation of laws and rules”.
In a statement, CAIT National President BC Bhartia and General Secretary Praveen Khandelwal said the CCI order is the first tangible result of more than two years of tireless efforts to rally to highlight the misdeeds of Amazon. The statement said that the Central Agency for Information Technology also demanded the immediate suspension of the Amazon portal in India.
The agency had filed a public interest lawsuit (PIL) with the Delhi High Court seeking a speedy ruling on the matter that the CCI was dealing with.
While approving the deal in November 2019, CCI also indicated that the order should be rescinded if at any time the information provided by the buyer was found to be incorrect.
“This consent should not be construed as immunity in any way from subsequent proceedings before the Commission for violations of other provisions of the (Competition) Act,” she said.
On November 29, the Supreme Court gave an additional two weeks for Amazon to appear and plead before CCI which refused to adjourn the hearing in a case regarding the revocation of consent given to the electronic retailer for the deal with Future Coupons.
In August 2019, Amazon agreed to buy 49 percent in unlisted Future Retail, which holds 7.3 percent of the stock 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 would acquire the retail and wholesale, logistics and warehousing business of Future Group for Rs 24,713 crore.
The arrangement scheme entails the consolidation of the retail and wholesale assets of the Future Group into a single entity Future Enterprises Ltd and then transferred to Reliance Retail.
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