Amazon And Reliance’s Animosity Aimed For Dominating Indian Retail Industry
Over a year, a pitched legal battle has been ongoing between e-commerce giant Amazon.com Inc and India’s Future Group, which has become complex and has forced Future to suspend its $3.4 billion divestment of assets to its rival and India’s largest conglomerate, Reliance Industries.
However, both the companies agreed to a truce last week after fighting one another in courtrooms for months at end. The two companies have told an Indian court to hold discussions for ending their dispute.
The dispute between the two companies is also seen as a fight for gaining the upper hand in one of the fastest-growing online retail markets of the world.
The Genesis of the Problem
Amazon and Future, India’s second-largest conglomerate after Reliance Industries, partnered with one another in 2019, with Amazon investing $200 million in a Future unit.
Amazon claims that the deal included non-compete clauses that prevented Future from disposing its retail assets to Amazon’s competitors, including Reliance Industries, a conglomerate led by Mukesh Ambani, India’s richest man. According to the Singapore International Arbitration Centre’s guidelines, the agreement also included stipulations requiring any disputes to be resolved.
Future, however, was forced to sell assets to Reliance in 2020 after being affected severely by the Covid-19 epidemic.
Amazon then went to Singapore arbitrators, who could put a halt to the transaction.
Since the “seat of arbitration” remains in New Delhi and the procedures are governed by Indian law, both sides have filed litigation in Indian courts, including the Supreme Court.
Amazon claims that numerous deals signed with Future in 2019 provided it with exceptional future retail assets rights. It had wanted to eventually acquire some of the assets if India’s foreign investment laws were relaxed. According to Future-Reliance, the latter possibility is “destroyed” by the possible agreement.
Statements from Amazon and Future
Future has denied the allegations against it and claimed that Amazon attempted to gain control of Future’s retail company illegally. If the Reliance purchase falls through, Future Retail, the group’s primary retail business, warns it risks liquidation, and its more than 27,000 employees might lose their jobs.
Both parties have hired a slew of attorneys, and renowned Indian law firms handle high-profile cases.
Two attorneys who previously served as India’s Solicitor General played a significant role in the case for Amazon and Future.
The Race for the Indian Retail Market
The question is whether Amazon can outperform Reliance in India’s $900 billion retail markets, which has 1.3 billion potential customers.
Future owns roughly 1,500 supermarkets, whereas Reliance has about 1,100. Both companies are rapidly growing into e-commerce, but the Future merger would immediately increase Reliance’s retail base, which has attracted significant international investors.
Amazon, for one, has put $6.5 billion into India, which it sees as a critical growth region and a major e-commerce player. By integrating the Indian company’s outlets on Amazon’s website, the Future collaboration has already helped Amazon expand its online food delivery portfolio.
Preventing any partnership between Future and Reliance is in line with the efforts of Amazon to counter billionaire Ambani’s expansion aspirations. Amazon stated Reliance’s combined position with Future “will further restrict competition in the Indian retail market”.
The Role of India’s antitrust Agency in the Fued
Last year, Future had complained about India’s antitrust agency complaining that Amazon was making inaccurate and conflicting representations regarding the 2019 deal’s objective.
Amazon claims it never withheld any information. However, the antitrust watchdog halted clearance of the 2019 agreement with Future in December last year, citing “a deliberate design on the part of Amazon to suppress the actual scope” of the deal and the company’s intent about the retail business of Future.
In a blow for the American behemoth, an Indian court stopped the two parties’ Singapore arbitration proceedings in light of the antitrust judgment.
Why the Truce between Amazon and Future Now
On February 25, Reliance, which had taken no public role in the disagreement, began a de facto acquisition of over 500 Future outlets, the crown jewels of its retail network.
Reliance has absorbed several of Future’s leases and has now sought to seize control, claiming delayed rental payments as the reason.
According to reports, this alarmed Amazon. During a Supreme Court hearing on March 3, Amazon referenced store takeovers and extended an olive branch, saying the “whirlpool” of litigation must come to a halt. Future consented to participate in the negotiations, which are now underway.