Last month, the Competition Commission of India (CCI) imposed a cumulative penalty of ₹ 202 crore on Amazon for ‘misleading’ the Indian anti-trust regulator through ‘false statements’ and ‘material omissions’ made on its dealings with the Future group. This development comes after two years of CCI having approved, amongst other things, Amazon’s acquisition of 49 per ent shareholding in Future Coupons Pvt. Ltd. (FCPL).

CCI, through its order of December 17, has given a 60-day notice to Amazon to furnish proper details regarding the scope and purpose of the combination which comprises of multiple interconnected transactions amongst Amazon and the Future group companies. Until then, the approval of CCI to Amazon’s deal with the Future group companies remains suspended.

The transactions in question

In a bid to seek to the clearance of CCI from an anti-trust perspective, Amazon had notified three transactions which involved Amazon and the Future group. However, none of these three transactions notified by Amazon mentioned that Amazon intended to have a strategic interest and control either directly or indirectly the subsidiary company of FCPL, i.e., Future Retail Ltd. (FRL). Amazon’s interest in FRL had become the moot point for the CCI.

Two different tales at two different forums

The findings of CCI are based on the contradictory statements made by Amazon before CCI and during the arbitral or court proceedings. Before the Indian anti-trust regulator, Amazon stated that its decision to invest in FCPL was to benefit from the potential of its gift and loyalty card business and address the existing gap in the payments landscape in India. Amazon also stated that as an investor, it had limited rights in FRL, which were provided with a view to protecting its investment in FCPL.

However, during the arbitration and the court proceedings, Amazon submitted that it had clear and unequivocal interest in FRL’s business. It was also stated that FRL was bound by Amazon’s acquisition of the shareholding of FCPL. Hence, CCI was of the view that Amazon concealed its strategic interest over FRL.

Amazon, in its defence, raised the ground of breach of confidentiality requirements and projected the anti-trust proceedings as an ‘attempt by FCPL to stifle the ongoing arbitral proceedings’. However, CCI rejected the submissions of Amazon observing that the anti-trust proceedings were only inquisitorial in nature and would not concern the arbitration.

Upon reviewing the internal documents of Amazon, CCI observed that the rationale of Amazon’s dealings with the Future group was to build an ultra-fast delivery service across top cities in India leveraging the national footprint of Future group. Through these transactions, Amazon wanted to secure its position as the single largest shareholder in FRL when foreign direct investment would open up in the retail sector. This was essentially to block competitive interest in FRL and utilise its pan-India presence to Amazon’s advantage.

CCI observed that Amazon had misrepresented itself by claiming that the deal was to expand Amazon’s portfolio in the payments landscape in India. Further, Amazon had wrongly claimed that it did not have any direct or indirect interest in FRL. Hence, as per CCI, Amazon had never indicated that the deal was being pursued to have a foot-in-the-door in the Indian retail sector and acquire any strategic rights over FRL. Accordingly, the Indian anti-trust regulator held that the instant matter was a clear, conscious and wilful case of misrepresenting the purpose of the deals before the CCI.

While the Amazon-Future saga appears to be nowhere near closure, CCI’s decision comes as a fair warning to the conglomerates often engaged in expansion of business. The temptation to project a transaction as competition-friendly or concealing material aspects to have quick approvals maybe real. However, proper legal due diligence, and statutory compliance is utmost important to avoid hefty penalties and prevent the ship from drowning even before it sets sail.

( Authors are advocates at a law firm, Phoenix Legal )