New Delhi, India: The Competition Commission on Friday stopped its clearance of Amazon's contract with Future Coupons, which had been in place for more than two years, and slapped a Rs 202 crore penalty on the e-commerce giant for failing to provide truthful and complete data about the transaction.
The CCI decision is significant in light of Amazon's long-running heated legal dispute with Future Group over the latter's proposed Rs 24,713 crore deal with Reliance Retail Ventures Ltd. (RRVL).
Deals beyond a particular threshold require CCI clearance, although the watchdog seldom suspends such permission.
The antitrust violations arose "from a conscious design on the part of Amazon to obscure the actual scope and purpose of the combination," according to the regulator's 57-page judgement.
As a result, Amazon has been hit with fines of Rs 2 crore.
The watchdog has also imposed a penalty of Rs 200 crore for failing to announce the combination in the required terms.
Through three levels of transactions, Amazon was able to acquire a 49 percent share in Future Coupons.
Amazon had failed to reveal true and comprehensive details of the purpose of the combination, which were required to be provided while seeking clearance, according to the watchdog.
"... Amazon hid the true scope of the merger and made false and misleading claims about the BCAs (Business Commercial Agreements), which are linked with the scope and purpose of the merger," according to the judgement.
CCI further stated that it has chosen to re-examine the combination because it involves players who are well-known in the online marketplace and physical retailing and have considered strategic alignment between their businesses.
Amazon has been given 60 days from the date of receiving the order to file a notice with "true, correct, and complete information.
The approval issued for the merger on November 28, 2019, "will remain in abeyance" until the notice is resolved, according to CCI.
Amazon.com NV Investment Holdings LLC (Amazon) – a direct subsidiary of Amazon.com Inc — and Future Coupons were the parties involved in the merger.
"We are studying the Competition Commission of India's order and will make a decision on next steps as soon as possible," an Amazon spokeswoman said in a statement.
Amazon had filed an arbitration complaint against Future Group over the proposed transfer of Future Retail's assets. Amazon's submissions to the regulator and arbitrator, according to Future Coupons, were conflicting. In June of this year, CCI filed a show cause notice to Amazon.
"Furthermore, Amazon misrepresented that its decision to pursue the combination was based on FCPL's (Future Coupons Pvt Ltd) unique business model, and that FRL (Future Retail Ltd), a company with strong financials and a futuristic outlook, is only relevant to the combination from the perspective of financial strength to FCPL," CCI added.
The watchdog also stated that it has no reservations in concluding that Amazon's actions amount to "suppression and misrepresentation of the combination's aim, which is a substantial particular," and that this is in violation of competition laws.
"Similarly, in Amazon's internal correspondence, the rights to FRL that were deemed strategic were misrepresented as basic investor protection rights.
The order stated that "such frequent representations, contrary to their true purport, amount to statements that are false in substantial detail, in violation of the requirements contained in paragraphs (a) and (b) of Section 44 and clause (a) of sub section (1) of Section 45 of the Act."
Citing internal Amazon email, CCI claims that Amazon's rights over FRL "are at the heart of the discussions" and that the requirement for the FRL SHA (Shareholding Agreement) was "to achieve the claimed objective of the merger."
Aside from failing to provide a single notice that covered all of the interconnected steps of the combination, Amazon also failed to provide true and complete information about the substance of the combination. "...the FRL SHA was sought to ensure that FRL's business became a critical asset for Amazon to extend and strengthen its ultra-fast delivery services," according to CCI.
The CCI's suspension of the contract is a "landmark order," according to the Confederation of All India Traders (CAIT), and "Amazon stands fully exposed for its malpractices and bunch of lies at all levels, as well as continuing violation of laws and standards."
CAIT National President B C Bhartia and Secretary General Praveen Khandelwal said in a statement that the CCI order is the first tangible result of the grouping's more than two-year-long efforts to expose Amazon's wrongdoings. CAIT has also urged that Amazon's Indian platform be shut down immediately, according to the statement.
CAIT had filed a Public Interest Litigation (PIL) in the Delhi High Court, requesting that the matter handled by CCI be resolved quickly.
While approving the acquisition in November 2019, CCI additionally said that the order will be reversed if the acquirer's information was proved to be false at any time.
It had stated that "this permission should not be taken in any way as immunity from future proceedings before the Commission for infringement of other provisions of the (Competition) Act."
On November 29, the Supreme Court ordered Amazon two more weeks to attend and argue before CCI, which had refused to defer a hearing in a dispute involving the e-cancellation retailer's of approval for the transaction with Future Coupons.
In August 2019, Amazon agreed to buy 49% of unlisted Future Coupons, a company that owns 7.3 percent of listed Future Retail through convertible warrants and has the option to buy into the flagship Future Retail after 3 to 10 years.
Future Group's retail and wholesale businesses, as well as its transportation and storage businesses, will be acquired by RRVL for Rs 24,713 crore in August 2020.
Future Group's retail and wholesale assets will be consolidated into one firm, Future Enterprises Ltd, and then transferred to Reliance Retail under the scheme of arrangement.
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