In a major setback for Amazon, the National Company Law Appellate Tribunal (NCLAT) on Monday rejected its appeal against the December 2021 order of the Competition Commission of India (CCI) suspending a deal struck by it to acquire a 49% stake in Future Coupons (FCPL). The NCLAT upheld the CCI’s order, which had suspended the approval given in 2019 on the grounds that the e-commerce firm had withheld vital information from it. The appellate tribunal also upheld the CCI’s order imposing a fine of Rs 200 crore on Amazon and asked it to pay it within 45 days.
Despite the setback to Amazon, the order has no immediate implication on the Reliance Retail-Future Retail (FRL) deal, which has fallen through after FRL’s lenders rejected it. Reliance has already acquired around 900 FRL stores for defaulting on rent payment.
Still, the order may have some impact on the string of cases being fought between the Future Group and Amazon in the Delhi high court and Supreme Court. Though an Amazon spokesperson did not specifically say whether the company would challenge the NCLAT’s order in a higher court, legal observers said the e-commerce company would surely appeal in due course of time.
In its 310-page order, NCLAT said Amazon did not “make full, whole, fair, forthright and frank disclosure of relevant materials and had furnished only limited details/disclosure, pertaining to its acquiring strategic rights and interests over FRL”. The two-member NCLAT bench comprising Justice M Venugopal and Dr Alok Kumar Mishra added,“In this regard, this appellate tribunal is in complete agreement with the view arrived at by the CCI.”
FCPL is an entity of FRL and through a 49% stake in it, Amazon had claimed that it had the first right of refusal for any sale of Future Group’s businesses. This was the core of its fight with Future Group, when the latter concluded a deal to sell its retail and logistics businesses to Reliance Retail.
On the question of the CCI’s power to put an earlier order in abeyance, the bench answered in the affirmative, saying the, “CCI has residual power to annul, modify, vary to keep the earlier order passed by it in abeyance based on misstatement of facts or misrepresentation”.
The CCI, in its December 2021 order, had said Amazon had not disclosed the intent to indirectly control FRL, the parent firm of FCPL, via its 49% stake in FCPL. Amazon had appealed against the order in January this year.
Before the NCLAT order, the CCI had said Amazon had presented a completely false statement on the combination before it. While it sought approval for its investment only in FCPL’s coupons and payments business, “the combination was intended to be an investment in FRL and its retail business, whereby the appellant (Amazon) could gain a ‘foot-in-the-door’ in the Indian offline retail market”.
The 2019 approval was granted as it was only the “proposed transaction” and not the “business transaction”, the CCI said, adding that it possesses the “requisite power” to annul an order if the same was procured by means of fraud or misrepresentation.
During the course of the argument in the NCLAT, Amazon had said all agreements regarding buying 49% stake in FCPL were disclosed before the CCI and nothing was hidden. Competition assessment of the deal was also undertaken by the commission and it was held that there was no appreciable adverse effect on the competition. Amazon also argued that the initial order of approval was a speaking order, or one which explains the rationale behind the order.