Amazon’s fight for retail supremacy with Reliance, an explainer: Report
For more than a year, Amazon.com Inc and India’s Future Group have been locked in a complicated legal impasse that halted the sale of Future’s $3.4 billion assets to the country’s largest conglomerate, Reliance Industries. Have given.
After months of doing business in a courtroom, Amazon and Future unexpectedly agreed on March 3 to discuss settling their dispute.
Here’s why the controversy, seen as the key to deciding who gets the upper hand in one of the world’s fastest growing retail markets, is everything, and what led to the sudden change in tone.
What caused the controversy?
In 2019, Amazon and Future, the number two players in India behind market leader Reliance, became business partners after the US company invested $200 million in a unit of the Indian conglomerate.
The deal, Amazon argues, came with non-compete clauses that prevented Future from selling retail assets to some rivals, including Reliance, run by one of India’s richest men, Mukesh Ambani. The deal also included clauses to settle any disputes under rules set by the Singapore International Arbitration Centre.
But in 2020, Future – badly hit by the COVID-19 pandemic – decided to sell assets to Reliance.
Amazon then approached intermediaries in Singapore and successfully blocked the sale. The two sides have challenged each other with lawsuits in Indian courts, including the Supreme Court because the “seat of arbitration” remains in New Delhi and Indian law governs the proceedings.
What are Amazon and Future called?
Amazon argues that various agreements it signed with Future in 2019 gave it exclusive rights over Future’s retail properties, some of which it also expected should eventually ease India’s rules for foreign investors. A possible Future-Reliance deal “destroys” the latter possibility, the US company has said.
Future denies any wrongdoing, saying Amazon seeks to illegally take control of Future’s retail business. Future Retail – the group’s flagship retail arm – says it is facing liquidation, and more than 27,000 of its employees could be jobless if the Reliance deal fails.
Both sides have deployed an army of lawyers, and top Indian law firms are involved in the high-profile case. The two lawyers who previously held the Solicitor General of India have been instrumental in arguing for Amazon and Future.
What is the big picture?
At stake is whether Amazon can become a more significant force than Reliance in a $900 billion retail market with 1.3 billion consumers.
Reliance has 1,100 supermarkets, while Future has about 1,500. Both are rapidly expanding into e-commerce, but the future deal will immediately boost Reliance’s retail footprint, which has attracted foreign investors into the business.
For its part, Amazon has invested $6.5 billion in India, which counts as a significant growth market where it is a major e-commerce player. The Future partnership had already allowed Amazon to promote its online portfolio of grocery delivery by integrating the Indian company’s stores on its website.
Keeping the future away from Reliance chimes in with Amazon’s efforts to counter billionaire Ambani’s growth plans. In a confidential legal filing, Amazon said that Reliance’s consolidated position with Future would “further restrict competition in the Indian retail market”.
How India Antitrust Agency got involved?
Future last year complained to India’s antitrust agency that Amazon was making false and contradictory submissions about the intent of the 2019 deal.
Amazon said it never withdrew any information, but last December, the watchdog suspended its approval of the 2019 deal with Future, saying it was “on Amazon’s part to suppress the true scope of the deal.” an intentional design” and its interest in the future. retail business.
In a setback for the US giant, an Indian court in January halted Singapore arbitration proceedings between the two sides in light of the antitrust decision.
Why did the Amazon expand the olive branch?
In a sudden move on February 25, Reliance, which had not played a public role in the controversy, began de facto acquisition of some 500 Future stores representing the Crown Jewels of its retail network.
Reliance had assumed several leases near a cash-strapped future and has now proceeded to take possession, citing missed rental payments.
It shook Amazon, sources say. On March 3, Amazon cited the acquisition of stores and expanded Olive Branch during a Supreme Court hearing that said the “vortex” of litigation must end. agreed to the future talks, which are currently underway.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)