Amazon’s struggle with trust for supremacy in Indian retail turned into a legal jungle: Here’s how

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For more than a year, Amazon and the Indian Future Group have been in a complex legal stalemate that has resulted in the sale of Future assets valued at US $ 3.4 billion (approximately Rs.24,700 billion) to rivals in the US Company Reliance Industries has blocked – without an end.

This is the dispute that is held to be the key to deciding who will get the upper hand in one of the fastest growing retail markets in the world.

What started the argument?

In 2019, Amazon and Future, number two in India behind market leader Reliance, became business partners when the US company invested US $ 200 million (around 14,796 billion rupees) in a gift card unit of the Indian group.

That deal, Amazon argues, was tied to certain non-compete clauses that prohibited Future from selling retail assets to certain rivals, including Reliance, which is run by one of India’s richest men, Mukesh Ambani. The deal also included clauses to resolve disputes in accordance with the rules established by the Singapore International Arbitration Center. But in 2020 Future – badly hit by the COVID-19 pandemic – decided to sell assets to Reliance.

Amazon then turned to Schlichter in Singapore and successfully stopped sales. Both parties have also challenged each other with lawsuits in Indian courts, including the Supreme Court, as the “arbitration seat” remains in New Delhi and the proceedings are governed by Indian law.

What do Amazon and Future say?

Amazon argues that various agreements signed with Future in 2019 granted it special rights to Future’s retail assets, some of which had hoped to eventually own them should India’s rules on foreign investors be relaxed. The potential Future Reliance deal “destroys” the latter prospect, the US company said.

Future denies any wrongdoing, saying Amazon is illegally attempting to control Future’s retail business. Future Retail – the group’s flagship retail arm – is on the brink of liquidation and its 27,000+ employees could become unemployed if the Reliance deal fails.

What’s the bigger picture?

At stake is whether Amazon can grow into a bigger force in a $ 900 billion retail market with 1.3 billion Reliance consumers.

Conglomerate Reliance has operations including 1,100 supermarkets, while Future has more than 1,500. Both are expanding rapidly into e-commerce, but the Future deal will instantly boost Reliance’s presence in retail, which has attracted overseas investors.

For its part, Amazon has invested $ 6.5 billion (about Rs.48081 billion) in India, a major growth market where it is a leading e-commerce player. The Future partnership had already enabled Amazon to strengthen its online grocery delivery portfolio by integrating the Indian company’s businesses on its website.

Keeping Future away from Reliance fits in with Amazon’s efforts to combat billionaire Ambani’s growth plans. In a confidential legal filing, Amazon said Reliance’s consolidated position in Future “will further limit competition in the Indian retail market.”

How did India’s antitrust authorities come into play?

Future complained to the Indian competition authority, the Competition Commission of India (CCI), that Amazon was making false and contradicting statements about the intent of the 2019 deal.

Amazon said it never hid any information, but last December the CCI suspended approval of the 2019 deal with Future because there was “a deliberate design on the part of Amazon to understand the real scope” of the deal and its interest in retailing of future to suppress companies.

While Amazon claims the CCI acted beyond its authority, Future claims the US company no longer has the right to make its claims because the 2019 deal, even now, has no regulatory approval.

In a setback for the US giant, the Delhi High Court this month suspended the Singapore arbitration between the two sides amid India’s cartel ruling.

Arbitration has since been on hold, but Amazon has challenged the rulings in Indian courts that were still pending on the matter.

© Thomson Reuters 2021

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