Explainer: Amazon's battle with Reliance for India retail supremacy

Future Enterprises

16/03/2022 08:14

(Adds details on failed settlement talks)
    By Abhirup Roy and Aditya Kalra
    NEW DELHI, March 16 (Reuters) - For more than a year,
Amazon.com Inc  AMZN.O  and India's Future Group have been
locked in a complex legal stand-off that has stalled Future's
$3.4 billion sale of assets to rival Reliance Industries
 RELI.NS , the country's biggest conglomerate.
    Amazon and Future agreed to out-of-court settlement
discussions this month, but the two sides told India's Supreme
Court on March 15 they had failed to resolve the matter.
 urn:newsml:reuters.com:*:nL2N2VI07B
    Following 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 U.S.
company invested $200 million in a unit of the Indian group. 
    That deal, Amazon argues, came with non-compete clauses that
prohibited Future from selling retail assets to certain rivals,
including Reliance, run by India's richest man, Mukesh Ambani.
The deal's terms call for disputes to be settled by the
Singapore International Arbitration Centre.
    In 2020, Future - hit hard by the COVID-19 pandemic -
decided to sell assets to Reliance. 
    Amazon then approached Singapore arbitrators and
successfully stopped the sale. Both parties have also challenged
each other in Indian courts, including the Supreme Court.

    THEIR ARGUMENTS
    Amazon argues various agreements signed in 2019 with Future
gave it special rights over Future's retail assets, some of
which it had also hoped to ultimately own should India's rules
for foreign investors be eased. The potential Future-Reliance
deal "destroys" the latter prospect, the U.S. company has said.
    Future denies any wrongdoing, saying Amazon is illegally
seeking to exert control on Future's retail business. Future
Retail  FRTL.NS  - the group's flagship retail arm - says it
faces liquidation if the Reliance deal fails. 
    
    THE STAKES
    If Amazon were to prevail, that could set it up to become 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 expanding fast into e-commerce.
    Amazon has invested $6.5 billion in India - a key growth
market where it is a leading e-commerce player. The Future
partnership had helped Amazon to boost its online portfolio of
grocery deliveries by integrating the Indian company's stores on
its website.
    Keeping Future away from Reliance chimes with Amazon's
efforts to combat Ambani's growth plans. In one confidential
legal filing, Amazon said Reliance's consolidated position with
Future "will further restrict competition in the Indian retail
market".  urn:newsml:reuters.com:*:nL1N2SZ1TK
    
    THE WRANGLING
    Future last year complained to India's antitrust agency that
Amazon was making incorrect and contradictory submissions about
the intent of the 2019 deal.
    Amazon said it never concealed any information, but last
December the watchdog suspended its approval of the 2019 deal
with Future, saying there was "a deliberate design on the part
of Amazon to suppress the actual scope" of the deal and its
interest in Future's retail businesses.  urn:newsml:reuters.com:*:nL4N2T22QJ
    In a setback for the U.S. giant, an Indian court in January
halted the Singapore arbitration proceedings between the two
sides in light of the antitrust decision.  urn:newsml:reuters.com:*:nL1N2TL0PC
    
    RELIANCE' SEIZURE OF STORES AND FAILED TALKS
    On Feb. 25, Reliance, which had not played a public role in
the dispute, suddenly took control of hundreds of Future stores,
citing non-payment of rent it was due. urn:newsml:reuters.com:*:nL3N2V7251
    On March 3, Amazon extended an olive branch during a Supreme
Court hearing, saying the "whirlpool" of litigation must end and
proposed talks which Future agreed to.
    On March 15, the two sides told the court the talks had
failed. Earlier in the day, Amazon ran newspaper ads accusing
the Indian firms of transferring the stores "in a clandestine
manner by playing a fraud on the constitutional courts in
India." Reliance hasn't commented, while Future denies any
wrongdoing.
    Sources said the talks collapsed because Amazon wanted at
least $200 million - the amount it had invested in Future's unit
- returned. But the Indian company said it wasn't in a financial
position to do so. urn:newsml:reuters.com:*:nL2N2VI1K2 

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
'The shops are gone': How Reliance stunned Amazon in battle for
India's Future Retail    https://reut.rs/3HJCsbx
ANALYSIS-Battle of the billionaires – Bezos, Ambani gun for
India retail crown     https://reut.rs/2JcHaGd
FACTBOX-India retail - A nearly $900 billion market dominated by
mom-and-pop stores    https://reut.rs/2OYLmMV
 
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 (Reporting by Aditya Kalra in New Delhi and Abhirup Roy in
Mumbai; Editing by Kenneth Maxwell and Edwina Gibbs)
 ((aditya.kalra@tr.com; +91-11-49548021; Twitter @adityakalra;))