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NCLAT upholds 200 crore fine dealt to Amazon by CCI

NCLAT on June 13 upheld the ₹200 crore penalty dealt to Amazon by the CCI and also upheld the suspension of the Amazon–Future Coupons deal.

What’s the news? The National Company Law Appellate Tribunal (NCLAT) on June 13 upheld the ₹200 crore penalty handed to Amazon by the Competition Commission of India (CCI) and also upheld the suspension of the Amazon–Future Coupons deal, ANI reported.

Give me context: CCI on December 17, 2021, suspended the approval it gave for Amazon’s investment in Future Coupons in 2019 and imposed a ₹200 crore penalty on the company for concealing information while seeking approval. At the heart of the issue is the allegation that Amazon, while seeking approval, did not disclose that it had a strategic interest in Future Retail through its investment in Future Coupons. Amazon then approached the NCLAT arguing that CCI does not have the power to revoke the agreement. However, a two-member NCLAT bench comprising Justice M. Venugopal and Ashok Kumar Mishra on Monday agreed with CCI that Amazon failed to make a “full, fair, forthright” disclosure about its interests in Future Retail and ordered Amazon to pay the fine within 45 days.

Why does this matter? This CCI order was a huge blow to Amazon because Amazon had used its investment in Future Coupons to block the sale of Future Retail to Reliance. Based on this CCI ruling, Future Group approached the Delhi High Court and asked the court to stop the arbitration proceedings being held at a Singapore arbitration tribunal, which the court subsequently did. Nevertheless, Amazon, as recently as this month, warned Future Group from directly or indirectly going ahead with the sale to Reliance stating that it would take all action available in law against the company and its promoters. The NCLAT ruling, however, weakens Amazon’s position as the very basis for Amazon’s legal rights came from its investment in Future Coupons.

Outside of this battle, NCLAT’s decision to uphold CCI’s order sends the signal that acquisition and merger approvals are not final and government bodies have the power to undo them if required. As Amazon pointed out back in December, this might send the wrong signal to foreign investors:

“[The deal] is bound to send a message to foreign investors that the economy and regulatory landscape of India are still not developed enough to provide stability and certainty to foreign investments.”

Why it does not matter? The Amazon vs Future Retail battle turn took an unexpected turn in March when Reliance stealthily took over a large chunk of Future Group’s stores and rebranded them due to non-payment of rent by Future. After that, Reliance decided to call off its $3.4 billion deal to acquire a stake in Future Group. Future Group is currently facing insolvency proceedings. While an overturn of the CCI order by NCLAT would have given Amazon some leverage in the ongoing court and arbitration battles, it is unclear what is left to fight for and whether this battle will reach a legal conclusion soon.

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CAIT welcomes the NCLAT decision: The Confederation of All India Traders, which has opposed Amazon on multiple fronts, welcomed the decision. Praveen Khandelwal, Secretary-General of CAIT, tweeted:

What next? Amazon can challenge the NCLAT decision in the Supreme Court, but it is not clear if the US giant will do so.

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