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CCI must decide on revoking approval given to Amazon, Future Coupons deal in two weeks: Delhi HC

A decision by India’s competition regulator is likely to trigger another set of legal challenges.

In response to a petition filed by the Confederation of All India Traders (CAIT), the Delhi High Court on November 16 ordered the Competition Commission of India (CCI) to rule on revoking the approval given to Amazon’s investment in Future Coupons within two weeks, CAIT said in a press statement.

CCI counsel ASG Venkatraman said that the agency is contemplating calling Amazon on January 4 for a hearing after which the matter will be decided, but the court refused to wait till then.

Recap: In November 2019, Amazon received approval to acquire a 49 percent equity in Future Coupons, the promoter entity of Future Retail, which operates 900 stores in India. Since Future Coupons owned a 7.3 percent stake in Future Retail, the deal gave Amazon a 3.58 percent stake in Future Retail. Then, in August 2020, Reliance announced that it will buy most of Future Group’s retail, wholesale, and logistics business in a deal worth Rs 24,713 crore. Amazon objected to this acquisition saying it had the right of first refusal because of its stake in Future Coupons. Both Amazon and Future have been engaged in a legal battle over this issue since October 2020, which you can read all about here. Most recently, on October 20, a Singapore arbitration court ruled that Future Retail is a party to the agreements signed between Amazon and Future Coupons and must participate in the arbitration process, which is set to begin sometime this month.

Read Everything You Need To Know About The Amazon Vs Reliance And Future Retail Case

Back to the issue: In March this year, Future Group asked CCI to revoke the approval it gave to Amazon’s investment in Future Coupons stating that Amazon misrepresented its interests when seeking the approval. Reiterating the same stance, Future Retail independent directors this month sent a letter to the CCI. CAIT followed up a day later with a letter of its own to CCI and on November 15 filed a public interest litigation at the Delhi High Court asking for an intervention.

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Read Future Retail Independent Directors Ask CCI To Revoke Approval Of Amazon’s Investment In Future Coupons

Why this matters: If CCI revokes the approval given to Amazon, it renders the company’s right of first refusal to the Reliance—Future deal ineffective, which could theoretically allow Reliance to go ahead with its acquisition of Future Group. But practically, such a decision by CCI will most likely trigger another set of legal challenges.

What does CAIT argue in its petition?

  1. Why is CAIT intervening in a corporate fight? CAIT said that it filed the PIL on behalf of the 6000 traders who had supplied goods to Future Group and are yet to be paid dues totaling Rs. 10,000 crore. The Reliance deal, which Amazon is fighting against, could solve this payment crisis. “Between the fights of corporate giants, traders should not be made a scapegoat or suffer any financial loss,” CAIT said.
  2. Amazon misrepresented the terms of the deal: CAIT is demanding that CCI revoke its approval to the Amazon–Future deal because Amazon misrepresented the terms of the deal. In its letter to CCI, CAIT had written: “Amazon has falsely represented that it was investing in the business of Future Coupons Private Limited (FCPL) and taking indirect protective rights in FRL [Future Retail Limited] to protect its investment and obtained CCI approval. Whereas the actual fact is Amazon was indirectly investing in Future Retail and obtaining strategic material and special rights over FRL.”
  3. CCI would not have approved the deal if it had known Amazon’s true intent: Amazon’s control over Future Retail through its investment in Future Coupons is illegal as no foreign company is allowed to own or control a multi-brand retail company, CAIT said. “Had Amazon declared their intent of such control and relevant fact in their notice to CCI at the time of seeking its approval, CCI would have never allowed such illegal transaction to happen,” CAIT submitted.
  4. Such instances could set a bad precedent: “If such misrepresentation are allowed to continue, then every company would misrepresent the facts of transactions just to seek CCI’s approval and subsequently carry out a different transaction camouflaged as a transaction approved by CCI,” CAIT argued.
  5. Allowing Reliance–Future deal to proceed will benefit other stakeholders as well: CAIT also argued that if Reliance’s acquisition of Future goes as planned, it would ensure that “the tens of thousands of investors and shareholders would get a lifeline to recover their hard-earned monies entrusted to the Future Group” and public sectors banks will be able to recover what they have lent to the company.
  6. CCI sitting on this matter for over 230 days: CAIT said that CCI started looking into this matter in March this year and then in June issued a show-cause notice to Amazon. It has been over 230 days and CCI has not taken any decision, CAIT argued. “CCI, as a regulator, cannot delay deciding a matter which has ramifications on public interest” and “should be asked to adjudicate and decide this matter within the next few weeks,” CAIT submitted.

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