For more than a year, Amazon and Indian group Future have been locked in a complex legal impasse that has blocked the sale of Future assets for $ 3.4 billion (around 24,700 crore) to rival US company Reliance. Industries – with no end in sight.
Here’s what the dispute is, considered key to deciding who wins in one of the world’s fastest growing retail markets.
What triggered the dispute?
In 2019, Amazon and Future, the second largest player in India behind market leader Reliance, became business partners when the US company invested $ 200 million (around Rs. 14,796 crore) in a unit of group gift certificates. Indian.
The deal, according to Amazon, came with certain non-compete clauses that prohibited Future from selling retail assets to certain rivals, including Reliance, run by one of India’s richest men, Mukesh Ambani. . The agreement also included clauses for the settlement of any disputes under the rules established by the Singapore International Arbitration Center. But in 2020, Future – hit hard by the COVID-19 pandemic – decided to sell assets to Reliance.
Amazon then approached arbitrators in Singapore and managed to stop the sale. The two sides have also argued in legal proceedings before Indian courts, including the Supreme Court, as the “seat of arbitration” remains in New Delhi and Indian law governs the procedure.
What do Amazon and Future say?
Amazon argues that various deals signed in 2019 with Future gave it special rights to Future’s retail assets, some of which had also hoped to eventually own if India’s rules for foreign investors were relaxed. The potential Future-Reliance deal “destroys” the latter prospect, the US company said.
Future denies any wrongdoing, claiming that Amazon is illegally seeking control over Future’s retail operations. Future Retail – the group’s flagship retail arm – says it faces liquidation and its more than 27,000 employees could be unemployed if the Reliance deal fails.
What is the bigger picture?
At stake is whether Amazon can become a bigger force in a $ 900 billion (roughly Rs. 6,658,449.78 crore) retail market, with 1.3 billion consumers, from Reliance.
The conglomerate Reliance has operations comprising 1,100 supermarkets, while Future has more than 1,500. Both are growing rapidly in e-commerce, but the Future deal will immediately increase Reliance’s business footprint, which has attracted investors. renowned foreigners in the company.
For its part, Amazon has invested $ 6.5 billion (approximately Rs. 48,081 crore) in India, which it counts as a key growth market where it is a leading player in e-commerce. The Future partnership had already enabled Amazon to boost its portfolio of online grocery deliveries by integrating the Indian company’s stores on its website.
Keeping Future away from Reliance dovetails with Amazon’s efforts to tackle billionaire Ambani’s growth plans. In a confidential legal brief, Amazon said Reliance’s consolidated position with Future “will further restrict competition in the Indian retail market.”
How did the Indian antitrust agency get involved?
Future complained to India’s antitrust agency, the Competition Commission of India (ICC), that Amazon was making incorrect and conflicting observations about the intent of the 2019 deal.
Amazon said it never withheld any information, but last December the ICC suspended its approval of the 2019 agreement with Future, saying there was “a deliberate design on Amazon’s part to remove the actual scope “of the agreement and its retail relevance to Future. companies.
While Amazon maintains that the ICC has acted beyond its powers, Future maintains that the American company no longer has the right to assert its claims because the 2019 agreement itself now lacks regulatory approval.
In a setback for the US giant, the Delhi High Court this month suspended Singapore’s arbitration proceedings between the two parties in light of India’s antitrust ruling.
Arbitration has since been suspended, but Amazon has appealed the decisions to Indian courts, which have yet to hear the case.
© Thomson Reuters 2021
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