Amazon Vs Future: Amazon ‘Suppressed’ Intent On Future Deal, Says CCI
The Competition Commission of India suspended approval to Amazon’s 2019 deal with Future Coupons Pvt. and imposed a Rs 200-crore penalty on the U.S. retailer, saying that it failed to identify and notify its strategic interest in the Indian group.
The regulator kept in abeyance its approval order that made way for the transaction between Amazon.com NV Investment Holdings and Future Coupons, according to its order on Friday.
The CCI gave Amazon 60 days to file a fresh notice which will include the relevant documents and information for the transaction.
Given that the combination is between players who are known in the online marketplace and offline retailing and they have contemplated strategic alignment between their businesses, the Commission considers it necessary to examine the combination afresh based on a notice to be given in Form II with true, correct and complete information...Competition Commission of India Order
The regulator imposed the Rs 200-crore penalty for Amazon’s failure to notify the shareholder agreement involving Future Retail Ltd. And an additional Rs 2-crore fine for the omission of material information when the U.S. ecommerce giant sought approval for the transaction with Future Coupons in 2019.
Section 43A of the Competition Act grants the power to impose penalty for not furnishing information on combinations. Section 44 allows the power to impose penalty for making false statement or omission to furnish material information.
In this case, the regulator was examining whether Amazon failed to disclose the rights it received over Future Retail and if that would constitute failure to disclose material information for the purpose of approving the online giant’s transaction with Future Coupons.
In 2019, Amazon had invested in the Future Group by acquiring a 49% stake in Future Coupons—a promoter entity of Future Retail. According to the shareholders’ agreement, Amazon was granted a call option, allowing it to acquire all or part of the promoters’ shareholding in Future Retail. The option could be exercised between the third and tenth years in certain circumstances, subject to applicable laws.
The competition regulations require the parties to disclose relevant economic and strategic purposes for entering into a transaction while seeking the CCI’s approval.
The commission held that the rights given to Amazon on Future Retail were intrinsic elements of the transactions, especially when, in their internal correspondence, Amazon had been referring to these as “strategic rights”.
FCPL was merely a vehicle for Amazon to acquire interest over FRL, and such interest was considered necessary to implement strategic alignments between the business activities of Future and Amazon groups in India.Competition Commission of India Order
Amazon, however, took the stand before the commission that it did not have any direct or indirect shareholding in Future Retail, and Future Coupon was granted some rights in Future Retail only to protect Amazon’s investment in Future Coupons.
The rights granted do not extend to any subject matter that encroaches upon the commercial and operation decision-making process of Future Retail, Amazon had told the CCI.
But the commission relied on the internal correspondence of the company to note that the stand taken before the CCI was in stark contrast to that. The commission noted that the agreements in question were supplied by Amazon but the intent behind the transaction was not disclosed.
The business potential of Future Coupons was shown as the driving factor for Amazon to pursue the combination and Future Retail was merely shown as a factor of financial strength, said the CCI.
But the regulator held that the focus of Amazon was all along on Future Retail.
There was a deliberate design on the part of Amazon to suppress the actual scope and purpose of the combination, the commission said.