For more than a year, Amazon.com Inc and India’s Future Group have been locked in a complex legal stalemate that has blocked Future’s $3.4 billion asset sale to rival Reliance Industries, the biggest country conglomerate.
After trading barbs in courtrooms for months, Amazon and Future unexpectedly agreed on March 3 to hold talks to resolve their dispute.
Here’s what the dispute, seen as key to deciding who will have the upper hand in one of the world’s fastest growing retail markets, is all about, and what led to the sudden change in tone.
WHAT STARTED THE DISPUTE?
In 2019, Amazon and Future, India’s number two player behind market leader Reliance, became business partners when the US company invested $200 million in a unit of the Indian group.
That deal, Amazon said, came with non-compete clauses that prohibited Future from selling retail assets to certain rivals, including Reliance, run by one of India’s richest men, Mukesh. Ambani. The agreement also included clauses for the settlement of any disputes in accordance with the rules established by the Singapore International Arbitration Center. But in 2020, Future – hit hard by the COVID-19 pandemic – decided to sell assets to Reliance.
Amazon then approached the Singapore arbitrators and succeeded in stopping the sale. The two sides have also challenged each other through lawsuits in Indian courts, including the Supreme Court, since the “seat of arbitration” remains in New Delhi and Indian law governs the proceedings.
WHAT ARE SAYING AMAZON AND FUTURE?
Amazon argues that various deals it signed in 2019 with Future gave it special rights to Future’s retail assets, some of which it also hoped to eventually own if India’s rules for foreign investors were relaxed. The potential Future-Reliance deal “destroys” that latter prospect, the US company said.
Future denies any wrongdoing, saying Amazon is unlawfully seeking to exert control over Future’s retail operations. Future Retail – the group’s flagship retail arm – says it faces liquidation and its more than 27,000 employees could find themselves out of work if the Reliance deal fails.
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Both sides have deployed a battery of lawyers and India’s top law firms are involved in this high profile case. Two lawyers who previously served as Solicitor General of India played key roles in defending Amazon and Future.
WHAT IS THE BIGGEST PICTURE?
At stake is whether Amazon can become a bigger force in a $900 billion retail market, with 1.3 billion consumers, than Reliance.
Reliance has 1,100 supermarkets, while Future has about 1,500. Both are growing rapidly in e-commerce, but the Future deal will immediately strengthen Reliance’s business footprint, which has attracted big-name foreign investors to the sector. .
For its part, Amazon has invested $6.5 billion in India, which it sees as a key growth market where it is a leading e-commerce player. The Future partnership had already enabled Amazon to boost its online grocery delivery portfolio by integrating the Indian company’s stores on its website.
Keeping Future away from Reliance fits with Amazon’s efforts to fight billionaire Ambani’s growth plans. In a confidential legal filing, Amazon said Reliance’s consolidated position with Future “will further restrict competition in the Indian retail market.”
HOW DID INDIAN ANTITRUST AGENCY GET INVOLVED?
Last year, Future complained to India’s antitrust agency that Amazon was making incorrect and contradictory statements about the intent of the 2019 deal.
Amazon said it never withheld any information, but last December the watchdog suspended its approval of the 2019 deal with Future, saying there was “deliberate design on the part of ‘Amazon to remove the real scope’ of the agreement and its interest in Future’s retail business. companies.
In a setback for the US giant, an Indian court in January suspended Singapore’s arbitration proceedings between the two sides in light of the antitrust ruling.
WHY AMAZON EXTENDED AN OLIVE BRANCH
In a sudden move on February 25, Reliance, which had played no public role in the dispute, began executing a de facto takeover of some 500 Future stores which represent the crown jewels of its retail network. by retail.
Reliance had assumed many of the leases held by cash-strapped Future and has now taken over citing missed rent payments.
This spooked Amazon, sources said. On March 3, Amazon cited store takeovers and extended an olive branch during a Supreme Court hearing, saying the “whirlwind” of litigation must end. Future has agreed to the talks, which are currently underway.
Also Read: Reliance Takes Over Future Retail Stores Amid Legal Disputes With Amazon