The Competition Commission of India (CCI) halted it’s more than two-year-old permission for Amazon’s proposal to purchase a share in Future Coupons Pvt Ltd on Friday, as well as slapping a Rs 202 crore penalty on the e-commerce giant for several violations.
This comes as Amazon and Future Group are locked in a court battle over the latter’s proposed Rs 24,713 crore transaction with Reliance Retail Ventures Ltd. (RRVL).
In light of this, Future Group filed a complaint with the CCI. The regulator stated in a 57-page judgment that the permission for the Amazon-Future Coupons agreement “must stay in abeyance.”
Citing specific violations, CCI stated that they resulted “from a conscious design on Amazon’s behalf to obscure the real scope and purpose of the combination,” and that it sees no mitigating element. As a result, Amazon has been fined a total of Rs 2 crore. The watchdog has also imposed a Rs 200 crore penalty for failing to announce the combination in the required terms.
Amazon.com NV Investment Holdings LLC (Amazon) – a direct subsidiary of Amazon.com Inc – and Future Coupons were the parties engaged in the merger.
“We are analyzing the Competition Commission of India’s ruling and will decide on future measures in due course,” an Amazon spokeswoman said in a statement.
What does the CCI order state?
The CCI order states that “it is necessary to re-examine the combination and transactions.” CCI further asked Amazon to provide notification in Form II within 60 days of receiving the order, in line with sub-section (2) of Section 45 of the Companies Act. Furthermore, the approval was given on November 28, 2019, will be suspended until the notice is resolved. This is due to Amazon concealing the true nature of the transaction and making fraudulent and erroneous claims when obtaining permissions.
Why was Amazon fined?
The CCI fined Amazon Rs 200 crore for failing to identify and inform the Future Retail Limited Shareholders Agreement (FRL SHA) under the agreement. Section 6(2) of the Act made identification mandatory. Amazon must pay the fee within two months.
Amazon Future Group Dispute
Future Retail Limited (FRL) announced in August 2020 that it will sell its retail and wholesale operations to Reliance Retail. Amazon objected to this transaction before it could be completed. Amazon said that this is a violation of the contract it made with Future Coupons. Amazon claims that its deal with Future Coupons provided it with a “call” option.
The call option allowed it to exercise the option to buy all or a portion of Future Retail’s shareholdings in the firm between 3 to 10 years following the agreement. Amazon filed an emergency arbitration petition against Future Retail with the Singapore International Arbitration Centre (SIAC), and an emergency arbitrator stopped Future Retail from progressing with their agreement with Reliance Retail.
Order of the Supreme Court
The Supreme Court also maintained the implementation of SIAC’s ruling, which placed the agreement between Future Group and Reliance Industries Limited on hold.
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