Amazon and Future group Tussle: What, When and Why?

 Amazon and Future group Tussle

The tussle between the Future group and Amazon is only increasing and it’s searching for a legal conclusion that is not going to make things better between the three groups involved in it - Amazon, Future Retail and Reliance.

So, what is this tussle, when it started and why it started and the possible conclusions from it.

The Reliance and Future group Deal - 

In the August of 2020, Kishore Biyani-led Future Retail entered into an agreement with Reliance Industries Limited (RIL) group’s subsidiary Reliance Retail for  Rs 24,713 crore to sell its retail, wholesale, logistics and warehousing units. The deal will include sale of its supermarket chain Big Bazaar, premium food supply unit Foodhall and fashion and clothes supermart Brand Factory’s retail as well as wholesale units.

Future Group was very keen on selling its stakes for a long time because of pressure from lenders especially State Bank India (SBI) to manage the piling debt.

The lockdown in March added to the burden as the sales of the group, especially of Foodhall and Brand Factory got badly affected.

Amazon’s Objection - 

Last year future got into another agreement with the e-commerce giant Amazon. In the deal, Amazon acquired 49 per cent stake in Future Coupons, the promoter firm of Future Retail for a sum of nearly Rs.2000 crore. 

As part of the deal, the Future Retail would be able to place its products on Amazon’s online marketplace; also the Future Retails products would also be a part of Amazon’s new plan, which intended to deliver products in select cities within two hours of a customer ordering them. Future Group has more than 1500 stores all over India.

The deal also provided Amazon with a “call” option i.e. Amazon will have a time of 3-10 years of the agreement to acquire all or part of Future Coupon’s promoter, Future Retail’s shareholding in the company.

As per Amazon the deal was violation of a non-compete clause and a right-of-first-refusal pact it had signed with Future Group. The agreement bounded Future Group to inform Amazon before getting into any agreement with a third party. 

But the Future Group asserted that it's merely selling its assets and it was not in violation of the agreement.

With this claim, Amazon approached the Singapore International Arbitration Centre (SIAC) and got a stay order on the deal from the Arbitration. Along with this, Amazon also wrote a letter to Securities and Exchange Board of India (SEBI), the Bombay Stock Exchange and the National Stock Exchange (NSE) asking them not to approve the Future-Reliance deal as there was an interim stay order on the same by the SIAC and if the deal went ahead, it would show that orders by reputed tribunals were not respected in India. 

Future’s Stand on the Controversy - 

The company asserted that the deal with Reliance Retail will go ahead as planned and scheduled as it believes it has done no wrong as far as the deal with Amazon is concerned.

In an update to the stock exchanges on Sunday, Future Retail, while saying the usual, also said that the disputes raised by Amazon were “entirely misconceived”. The company in fact went on to say that it was a “bit rich” for Amazon to make the argument that Future Retail was misleading its shareholders, given the fact that it is not even a shareholder of the company.

“Evidently, Amazon’s letter is motivated by other considerations,” Future Retail alleged in the update it sent to exchanges.

Next in the line for the three companies - 

Having won the interim stay from SIAC, Amazon is leading the first round. But the fight is far from coming to an end. The Future Group has set aside Rs.1000 crore in an escrow account to factor in all present and future liabilities in its arbitration tussle with global e-commerce major Amazon. Future’s is also planning to move to Delhi High Court to get a go ahead with the deal as according to it, the interim stay from SIAC holds no value under Indian laws.

If Future-Reliance decides to go ahead with the deal, it is likely to push Amazon to move the arbitration tribunal in Singapore once again to seek a final stay on the issue until the matter is heard and disposed off by it.

-   Inputs from Indian Express

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