CCI suspends clearance for Amazon-Future deal, imposes ₹200 plus 2 crore penalty on Amazon

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The Competition Commission of India (CCI/ Commission) on Friday imposed a total penalty of ₹202 crore on NV Investment Holdings LLC (Amazon) for its failure to notify CCI about certain crucial details of its acquisition of 49 percent stake in Future Coupons Private Limited (FCPL), as required under Section 6(2) of the Competition Act, 2002 (Act) and for suppressing the actual scope and purpose of the deal.

The CCI in its 57-page order noted that there was a deliberate design on the part of Amazon to suppress the scope and purpose of the deal for which it imposed a penalty of ₹2 crore.

As regards failure to identify and notify Future Retail Limited Shareholders Agreement (FRL SHA) as a part of the deal, which was an obligation under under Section 6(2) of the Act, a penalty of ₹200 crore was imposed.

Amazon was ordered to pay the amount within 2 months.

The competition watchdog also kept in abeyance the deal between Amazon and Future until Amazon gives notice to the CCI of the proposed deal as per Form II specified under the Act within a period of 60 days and the said notice is disposed of by the CCI.


The proceedings against Amazon were initiated based on an application dated March 25, 2021 (Application) of FCPL.

By way of background Amazon had notified CCI about the proposed transaction to acquire 49 percent stake in FCPL.

A notification (notice) regarding the same was given by Amazon on September 23, 2019, pursuant to Section 6(2) of the Act, in Form I of Schedule II to the CCI (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (Combination Regulations).

In terms of ‘Part V: Description of the Combination’ of the aforesaid Notice, the Combination notified by Amazon comprised the following three (3) transactions :

Transaction I: The issue of Nine Million One Hundred and Eighty Three Thousand Seven Hundred and Fifty-Four (9,183,754) Class A voting equity shares of FCPL to Future Coupons Resources Private Limited (FCRPL). Prior to, and immediately post issuance of such equity shares, FCPL will be a wholly owned subsidiary of FCRPL; and

Transaction II: The transfer of Thirteen Million Six Hundred and Sixty Six Thousand Two Hundred and Eighty Seven (13,666,287) shares of FRL held by FCRPL (representing Two decimal Five Two Percent (2.52%) of the issued, subscribed and paid-up equity share capital of Future Retail Limited (FRL), on a Fully Diluted Basis) to FCPL; and

Transaction III: The acquisition of the Subscription Shares representing Forty Nine percent (49%) of the total issued, subscribed and paid-up equity share capital of FCPL (on a Fully Diluted Basis) by Amazon, by way of a preferential allotment.

It was also stated in the notice that in relation to the combination notified to the CCI, Amazon and the relevant entities and persons, belonging to the Future Group have entered into: (a) a share subscription agreement dated 22nd August, 2019 (FCPL SSA) to set out the terms and conditions of subscription by Amazon and the issuance by FCPL of its shares to Amazon; and (b) a shareholders agreement dated 22nd August, 2019 to determine their respective rights and obligations as shareholders of FCPL (FCPL SHA) Amazon stated in the notice that the parties have only executed FCPL SSA and FCPL SHA in relation to the combination.

The notice also mentioned that Amazon would acquire certain rights in terms of FCPL Shareholders Agreement (FCPL SHA) to protect its investment in FCPL. These, inter alia, included the requirement of prior written consent of Amazon, for FCPL to decide on or implement any matter under the shareholders’ agreement dated 12th August, 2019 relating to FRL (FRL SHA), which requires the consent of FCPL.

Amazon had also stated that it does not have any direct or indirect shareholding in FRL. It would not acquire directly any rights in FRL. Amazon has only limited investor protection rights in FCPL with a view to protect the value of its investment in FCPL. These rights can be exercised only through FCPL and not directly by Amazon. The said rights have been derived from the rights granted to FCPL in terms of FRL SHA, which was negotiated by the promoters, FRL and FCPL, independent of the investment by Amazon in FCPL and with a view to unlock value for FCPL.

FCPL filed the Application dated March 25, 2021 stating that Amazon has initiated arbitration proceedings in relation to transfer of assets of FRL, a company in which FCPL holds 9.82% of the shareholding and there are related litigations pending before the constitutional courts. It was alleged in the application that Amazon took completely contradictory stands in the arbitration proceedings and constitutional courts with respect to its investments in FCPL as compared to the representations and submissions made before the Commission. Such contradictions were said to establish false representation and suppression of material facts before the Commission.

The CCI, in its meeting held on May 17, 2021, considered the application and formed a prima facie view that: (a) Amazon failed to identify and notify FRL SHA as a part of the combination, in terms of Regulation 9(4) and Regulation 9(5) of the Combination Regulations; (b) Amazon had concealed its strategic interest over FRL; and (c) Amazon had made false and incorrect representations and concealed/suppressed material facts in contravention of the provisions of the Act.

Accordingly, the CCI issued show cause under Sections 43A, 44 and 45 of the Act to Amazon, on June 4, 2021.

Arguments by Amazon

– Regarding the allegation that FRL SHA was not notified as part of the combination, Amazon submitted that FRL SHA does not constitute a “combination” insofar as Amazon is concerned.

Further, FRL SHA was duly disclosed as forming the background to Transaction III. All relevant information pertaining to FRL that were material to the CCI’s assessment were disclosed. It was submitted that Amazon had made submissions in relation to the potential synergies arising out of FCPL’s business, the underlying investments held by FCPL in FRL and FRL’s business itself.

– Regarding the allegation of non-disclosure of non-compete obligations in the Notification, it was submitted that there are no noncompete clauses either in FCPL SHA or FCPL SSA or FRL SHA. Both SHAs provide transfer restrictions, which do not constitute a non-compete obligation.

– Regarding the internal communications, it was submitted that commercial arrangements with Future Group were negotiated since January, 2018 and Amazon explored multiple investment structures. Some of these documents/emails pertain to the period when the parties were still in negotiations. Further, Amazon has made disclosures about BCAs and importance of FRL’s Retail Assets.

– Regarding the allegation that Amazon exercises control over FRL, it was submitted that Amazon does not exercise any control over the day-to-day operational matters of FRL; it does not exercise any influence over the business operations of the market conduct of FRL

What CCI held

The CCI noted that the combination consisted of a composite of acquisition of shares, rights and commercial contracts.

Transaction I, Transaction II and Transaction III alone were identified and notified as constituent steps of the Combination, and FCPL SSA and FCPL SHA alone were stated as agreements executed in relation to the combination.

However, FRL SHA was also part of the combination and was executed at the behest of Amazon, is overwhelmingly evident from the email dated 4th April, 2019 of Amazon to Future Group. But the same was not notified as part of the combination.

“The rights of Amazon over FRL are at the heart of the negotiations and the need for FRL SHA was to achieve the said objective of the Combination. It is for these strategic rights and for the call option, that Amazon had paid a premium of 25% over the regulatory share price of FRL. This makes it clear that neither FRL SHA would have been executed in the absence of other steps/ transactions of the combination nor would Amazon have gone ahead with Transaction III in the absence of FRL SHA,” the CCI said.

In this regard, the CCI noted that Part V of Form I, requires a notifying party to describe the details of the proposed combination notified to the Commission but the same was not done/

“The Notice and subsequent submissions of Amazon, read as a whole bring out that Amazon was not forthcoming in disclosing the true and complete background/information regarding FRL SHA, particularly its interconnectedness (sic) with the combination and its purpose,” the CCI ruled.

Amazon had failed to disclose the fact that FRL SHA was negotiated as a part of the combination and an intrinsic element thereof to confer Amazon rights over FRL. This is more so when Amazon had been considering these rights as strategic in its internal correspondence, the order added.

The Court also turned down Amazon’s argument that its rationale behind the Combination was the business potential of FCPL to create long term value and provide return on the investment made by Amazon.

The Commission said that internal correspondence of Amazon clearly showed different purposes for envisaging the combination i.e., ‘foot-in-door’ in the Indian retail sector, secure rights over FRL that are considered as strategic by Amazon and Commercial Arrangements between the retail business of Future Group and Amazon.

In its response to the letters of the Commission, Amazon had continued with the suppression of actual purpose of the combination, the CCI observed.

“Amazon has not contested the genuineness of the internal correspondence or their contents. It is obvious that the purpose of Amazon to pursue the combination was not the potential of the gift and loyalty card business of FCPL, as has been claimed in the notice. Rather, FCPL was envisaged only as a vehicle in the combination to which no value or purpose is ascribed in the internal correspondence. Further, it is clear from the e-mail dated July 19, 2019 that the entire consideration of the combination has been arrived at on the basis of 25% premium to the regulatory price of FRL shares and that such premium was paid on account of the strategic rights and the call option provided to Amazon,” the order noted.

Thus,the CCI concluded that it was a clear, conscious and willful case of omission to state the actual purpose of the combination despite the disclosure requirement under Item 5.3 of Form I read with Regulation 5 of the Combination Regulations and Section 6(2) of the Act.

In sum, the CCI said that Amazon ought to have notified the combination, inter alia, consisting of the following inter-connected steps:

(a) Transaction I; (b) Transaction II; (c) Transaction III; (d) FRL SHA for the purpose of acquisition of strategic rights over FRL through FCPL SHA; and (e) commercial agreements between Amazon and Future groups, for the purpose of establishing strategic alignment and partnership between Amazon Group and FRL as well as have a ‘foot-in-the-door’ in the India retail sector.

“Amazon failed to notify FRL SHA and the commercial arrangements, as parts of the combination between the parties, and suppressed the actual purpose and particulars of the combination in contravention of the obligation contained in subsection (2) of Section 6 of the Act read with Regulation 5 and sub-regulations (4) and (5) of Regulation 9 of the Combination Regulations,” the CCI ruled.

It, thus, ordered imposition of penalty on Amazon besides keeping the deal in abeyance while directing Amazon to give notice in Form II within a period of 60 about the combination.

Read Order here:

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