THE FUTURE-AMAZON-RELIANCE FIASCO

Introduction/Background:

In the year 2019, Amazon had reportedly picked up a 49% stake in the loss-making Future Coupons – which was a part of the Future group. It is to be noted in this context that Future Coupon held a 7.3% stake in Future Retail, by virtue of which Amazon picked up an indirect stake of 3.5% in Future Retail (think Big Bazar, Nilgiris, FBB, Brand Factory).

                  

Picture credit: https://www.inventiva.co.in/business/finance/future-retail-move-sc

However, the 49% direct stake in Future Coupons and the indirect 3.5% stake that Amazon picked up at Future Retail, were not what they were after! The reality was something else altogether. When Amazon picked up the concerned stake in the Future Group, they signed two very important pacts:

a.      In the span of 3-10 years after Amazon had picked up the initial 49% stake in Future Coupons, they would have the liberty to take up the entirety of the stake in Future Retail.

b.      Non-compete clause: Amazon had listed some 15-20 odd companies that would not be allowed to pick up a stake in the Future. These companies were Reliance/eBay/Paytm/Walmart etc.

How did Reliance come into the picture?

In the year 2020, when COVID struck, Future Group suffered an even greater loss and reached a negative figure of around INR 7000 crore!

This is when Reliance came into the picture and according to the agreement that they entered into with Future, Future Retail along with Future Lifestyle and Future Consumer was going to be Reliance’s! The offer price for this deal was INR 24,713 crores. In addition, Reliance also ensured that Future’s 30,000 odd employees would be retained, even after the completion of the acquisition. Taking every nitty-gritty into consideration, the deal was a win-win for Futures and they eventually agreed to it.

How and why did Future enter into an agreement with Reliance, when they were already a part of a non-compete agreement with Amazon?

After Future entered into an agreement with Reliance, Future Coupons released a press statement that stated that Amazon had entered into a non-compete clause with Future Coupons and NOT with Future Retail which made both Future and Reliance, absolutely free to enter into an agreement with one another as far as Future Retail was concerned. In addition, according to the Foreign Direct Investment laws of our country, any company/firm/organization that invests a 49%-51% stake should take permission from the government of the concerned country that the firm decides to invest in. In the case of the Amazon-Future deal, this was a big, impending question mark!

What happened thereafter?

After Future signed a deal with Reliance for the latter to acquire the entirety of Future Retail along with Future Lifestyle and Future Consumer, Amazon moved to the Singapore International Arbitration Centre. With respect to the terms and conditions of the case, Amazon applied for emergency arbitration, which would enable the Singapore International Arbitration Centre to take a faster decision. In response to Amazon approaching the SIAC, the latter passed an interim order which ordered Future to put their agreement with Reliance on hold for the time being. Following that, Amazon approached a local court with the interim order, asking the court to stop Future and Reliance from approaching the Competition Commission of India (CCI) and the SEBI so that the deal wouldn’t progress any further.

Reliance retaliated by stating that the order was not full and final in nature. It was merely an interim order and Amazon did not have any substantial rights to stop them from entering into the said agreement.

Latest news: What did the apex court say and what happened thereafter?

After the aforesaid happenings, Amazon moved to the Supreme Court of India in August 2021. The Supreme court, in the year 2021, upheld the decision that was meted out by the SIAC. Although Future Retail had been preparing the groundwork for the deal by approaching various regulators and seeking their clearance, the SC’s ruling imposed a temporary halt to all such deals in the country.

In April 2022, Reliance canceled the INR 24,713 crore deal with Kishore Biyani’s Future group after 66.29% of the secured creditors of Reliance Retail, voted against the agreement.

In the latest happening, however, on June 13, 2022, Future’s shares rose sharply when the National Company Law Tribunal rejected Amazon’s plea against an anti-trust suspension of their deal with the Future group and upheld the CCI’s findings that Amazon would be penalized and would be required to pay a hefty amount of fine, totaling to INR 200 crore! As per the CCI report and the NCLAT judgment, Amazon had withheld crucial information when it had sought approval for the agreement in the year 2019.

As a note of conclusion, it can be very well said that the entire episode will one day prove to be an interesting business case study for all premier B schools in and around the world, to give an example of how three big commercial giants could have conducted their affairs in a far better manner, as compared to the legal implications that came about.

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-- Author Sneha Das