Amazon’s battle with Reliance Industries for retail supremacy

In 2020, Future – hit hard by the Covid-19 pandemic – decided to sell assets to Reliance.

New Delhi: For more than a year, Amazon.com Inc and India’s Future Group have been locked in a complex legal stalemate that has blocked Future’s $3.4 billion asset sale to rival Reliance Industries, the biggest country conglomerate.

Amazon and Future agreed to out-of-court settlement talks this month, but both sides told India’s Supreme Court on March 15 that they had failed to resolve the case.

Here is a guide to the dispute.

The trigger

In 2019, Amazon and Future, the No. 2 player in India behind market leader Reliance, became business partners when the American company invested $200 million in a unit of the Indian group.

That deal, Amazon said, came with non-compete clauses that barred Future from selling retail assets to certain rivals, including Reliance, run by India’s richest man, Mukesh Ambani. The terms of the agreement provide that disputes will be settled by the Singapore International Arbitration Center.

In 2020, Future – hit hard by the Covid-19 pandemic – decided to sell assets to Reliance.

Amazon then approached the Singapore arbitrators and successfully stopped the sale. The two sides have also challenged each other in Indian courts, including the Supreme Court.

Their arguments

Amazon argues that various deals it signed in 2019 with Future gave it special rights to Future’s retail assets, some of which it also hoped to eventually own if India’s rules for foreign investors were relaxed. The potential Future-Reliance deal “destroys” that latter prospect, the US company said.

Future denies any wrongdoing, saying Amazon is unlawfully seeking to exert control over Future’s retail operations. Future Retail – the group’s flagship retail arm – says it faces liquidation if the Reliance deal fails.

Challenges

If Amazon were to win, it could make it a bigger force than Reliance in India’s $900 billion retail market.

Reliance has 1,100 supermarkets, while Future has around 1,500 and both are growing rapidly in e-commerce.

Amazon has invested $6.5 billion in India – a key growth market where it is a major player in e-commerce. The Future partnership had helped Amazon boost its online grocery delivery portfolio by integrating the Indian company’s stores on its website.

Keeping Future away from Reliance fits with Amazon’s efforts to fight Ambani’s growth plans. In a confidential legal filing, Amazon said Reliance’s consolidated position with Future “will further restrict competition in the Indian retail market.”

The quarrel

Last year, Future complained to India’s antitrust agency that Amazon was making incorrect and contradictory statements about the intent of the 2019 deal.

Amazon said it never withheld any information, but last December the watchdog suspended its approval of the 2019 deal with Future, saying there was “deliberate design on the part of ‘Amazon to remove the real scope’ of the agreement and its interest in Future’s retail business. businesses.

In a setback for the US giant, an Indian court in January suspended Singapore’s arbitration proceedings between the two sides in light of the antitrust ruling.

Seizure of stores by Reliance and failure of talks

On February 25, Reliance, which had played no public role in the dispute, suddenly took over hundreds of Future stores, citing non-payment of rent owed to it.

On March 3, Amazon extended an olive branch during a Supreme Court hearing, saying the “whirlwind” of litigation must end and offered talks that Future accepted.

On March 15, both sides told the court that the talks had failed. Earlier in the day, Amazon ran newspaper ads accusing Indian companies of transferring stores “undercover by defrauding Indian constitutional courts”. Reliance has not commented, while Future denies any wrongdoing.

Sources said the talks broke down because Amazon wanted at least $200 million – the amount it invested in Future’s unit – returned. But the Indian company said it was unable to do so.

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