NCLAT rejects Amazon's appeal against CCI order on Future Group's deal

NCLAT rejects Amazon's appeal against CCI order on Future Group's deal

The judgment is seen as a vindication of the stand taken by the traders' confederation, which highlighted the anti-competitive practices of Amazon

The National Company Law Appellate Tribunal (NCLAT) has rejected the appeal of Amazon against an anti-trust suspension of its investment deal with Future Group, In a major setback to the US e-commerce giant, the tribunal stated that the retailer had not made full disclosures at the time of seeking the approval.

Supporting the findings of the Competition Commission of India (CCI), in relation to Amazon's deal with Future Retail Limited (FRL)'s subsidiary, Future Coupons Private Limited (FCPL), the tribunal also upheld the Rs.200-crore penalty imposed on Amazon. It directed Amazon to deposit the same in 45 days.

The NCLAT bench comprising Justice M. Venugopal and Justice Ashok Kumar Mishra said, "Amazon has not made full, whole, forthright and frank disclosures of relevant materials. It had furnished only limited disclosures pertaining to acquiring its strategic rights and interest in FRL and executing the commercial contract. The tribunal is in complete agreement with the view arrived at by the first respondent (CCI)."

In December 2021, the competition watchdog levied the Rs.200-crore penalty on Amazon and suspended its deal with Future. It stated that the US firm deliberately suppressed the actual scope and purpose of the 2019 investment and made false and incorrect statements. Arguing that it had not concealed any information, Amazon had challenged the decision.

In 2019, Amazon.com NV Investment Holdings, a direct subsidiary of Amazon.com Inc., had acquired a 49 percent shareholding in FCPL, which held a 9.82 percent interest in FRL. Citing its indirect shareholding in FRL, Amazon had opposed the sale of its retail assets to Reliance Industries for Rs.24,713 crore.

The CCI order had stated that Amazon had not disclosed its interest in FRL while seeking approval for its investment in FCPL.

The tribunal upheld the CCI view but reduced a separate penalty of Rs.1 crore each imposed under Sections 44 and 45 to Rs.50 lakhs each.

It further held that as per the obligatory requirement under the Competition Act, 2002, Amazon failed to provide relevant information on the combination.

The bench said, "Being responsible and accountable in not giving notice as required, the tribunal is not displacing the imposition of penalty of Rs.200 crore levied upon Amazon by CCI in the impugned order. The same is fair and sensible as per the Act."

In 2019, Amazon had agreed to purchase 49 percent in unlisted Future Coupons, which owns 7.3 percent equity in listed Future Retail through convertible warrants, with the right to buy into the flagship Future Retail after a period of three to 10 years. The deal size was about Rs.1,400 crores.

Meanwhile, FRL is presently facing an insolvency petition before the Mumbai bench of the National Company Law Tribunal by its lender after it committed defaults.

NCLAT concluded its hearing in April this year, over Amazon's plea after all parties filed revised notes of submissions along with relevant citations before the registry.

Apart from Amazon's plea, the appellate tribunal had also reserved the order on two other petitions in the matter filed by the Confederation of All India Traders (CAIT) and the All India Consumer Products Distributors Federation (AICPDF).

FRL was part of the 19 group companies operating in retail, wholesale, logistics and warehousing segments. In 2020, it was supposed to be transferred to Reliance Retail as part of the Rs.24,713 crores deal. But, in April, the deal was called off by billionaire Mukesh Ambani-led Reliance Industries.

Commenting on the development, CAIT welcomed the NCLAT order and said any move to captivate the Indian e-commerce and retail trade by anyone will not succeed under any circumstances.

In a statement, the trader's body said, "The NCLAT judgment is a vindication of our stand. We consistently highlighted the brazen anti-competitive practices and violations of law by Amazon, including its actions of deep-discounting, B2C e-commerce and the manner in which it entered the retail trading sector through its acquisitions of More Retail Ltd. and FRL."