Why did CCI slap ₹200 crore fine on Amazon?

Recently, the Competition Commission of India (CCI) fined US e-commerce giant, Amazon with Rs 200 crore.

Highlights

  • CCI has also suspended the 2019 Amazon deal with Future Coupons, a unit of Future Retail Ltd.
  • Amazon was fined for concealing facts while obtaining approval for this deal.

What does CCI order say?

According to CCI order, “it is required to re-examine the combination and transactions”.  In accordance with sub-section (2) of Section 45 of the Companies Act, CCI also directed Amazon to give notice in Form II within 60 days from the receipt of the order. Furthermore, the approval granted on November 28, 2019 will remain in abeyance until such notice is disposed of. This is so because, Amazon had suppressed the actual scope of the deal and had made false & incorrect statements while getting clearances.

Why Amazon was fined?

The CCI has imposed a penalty of Rs 200 crore on Amazon because, it had failed to identify and notify Future Retail Limited Shareholders Agreement (FRL SHA) under the agreement. Identification was an obligation under Section 6(2) of the Act. Amazon is required to pay the fine within two months.

Amazon-Future Group Dispute

  • The Future Retail Limited (FRL) had announced to sell its retail and wholesale business to Reliance retail, in August 2020. Amazon objected to this deal before it could be executed.
  • Amazon alleged that; it is a breach of contract it signed with Future Coupons. According to Amazon, its agreement with Future Coupons had given it a “call” option.
  • The call option enabled it to exercise the option to acquire all or part of shareholdings of Future Retail in the company, within 3 to 10 years of the agreement.
  • Amazon took Future Retail into Emergency Arbitration before the Singapore International Arbitration Centre (SIAC), where an emergency arbitrator barred Future Retail from proceeding with its deal with Reliance retail.

Supreme Court Order

Supreme Court had also upheld the enforcement of SIAC’s order, that puts on hold the deal between Future Group and Reliance Industries Limited.

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