Why The NCLAT Dismissed Amazon's Case Against CCI
CCI couldn't have suspected that Amazon's investment in Future Coupons was aimed at strategic rights in Future Retail, says NCLAT.
The Competition Commission of India had no opportunity to evaluate the effects of actual real transaction between Amazon.com NV Investment Holdings and Future Coupons Pvt., the National Company Law Appellate Tribunal said in its order on Monday.
This, the appellate tribunal said, was because Amazon made incorrect disclosures, omitted information in its filings with the regulator and persistently made representations that certain other agreements signed at the time of its investment in Future Coupons were independent of the transaction for which approval was sought.
...there was no room for the CCI to have any 'iota of needle of suspicion’ that the commercial agreements were part of the `Combination’ to establish a strategic alignment between the parties in retail sector...NCLAT Order
To come to this conclusion, the appellate tribunal examined Amazon's responses to CCI's queries in 2019 pertaining to the economic and strategic purpose of its investment in Future Coupons, as well as internal communications between Amazon's employees prior to seeking regulatory approval.
In 'pith and substance', Amazon failed to disclose its strategic intent and actual purpose to become the single largest shareholder of Future Retail if and when the law allowed for it, the NCLAT said.
....Amazon was required to reveal economic and strategic purpose, including business objective and rationale for each of the parties to the combination and the manner in which they are intended to be achieved...NCLAT Order
Basis these observations, the NCLAT came to an 'inevitable and inescapable conclusion that Amazon had not fulfilled its obligation' as per ingredients of competition law.
In upholding the CCI's conclusion and penalty amount, the NCLAT also dismissed Amazon's argument that the regulator had no power to suspend approval to a transaction.
It said that Amazon had obtained CCI's approval based on misstatement of facts, misrepresentation, not full and frank enough disclosures, and with an intent to gain unfair advantage and deceive another. This suppression and concealment of material facts amounts to 'fraud', the appellate tribunal noted in its order.
In such situations, an authority has an "inbuilt, an implied residual power to annul, modify, vary or to keep the earlier order passed by it in abeyance..." - NCLAT
Amazon now has 45 days to pay the Rs 200 crore penalty.
To recap, in December last year, the Competition Commission of India had suspended the approval to Amazon’s deal with Future Coupons and imposed a Rs 200-crore penalty saying that there was a failure to adequately identify and notify Amazon’s strategic interest in Future Retail.
Amazon had invested roughly Rs 1,400 crore for a 49% stake in Future Coupons. The agreements also gave Amazon certain rights vis-à-vis Future Retail. At that time, certain intra-promoter group transactions had preceded Amazon’s investment, including acquisition of 7.30% stake by Future Coupons in Future Retail. CCI’s December order had questioned the true intent behind all of this.