Business India ×
  Magazine:
Retailing

Published on: Oct. 27, 2020, 8:51 a.m.
Future group and Amazon in legal tussle
  • Big Bazaar: in the eye of a legal storm; Photo: Sanjay Borade

By Ritwik Sinha. Consulting Editor, Business India

After signing the over $3 billion deal with Mukesh Ambani’s retail company in late August, if Kishore Biyani of Future group felt that all his troubles were over, perhaps he overlooked a potential trouble spot quite close by. A relatively small partnership, which he had forged with Jeff Bezos’ Amazon in 2019, had opened the windows of a possible bigger alliance in the future. But that proposition has now completely vanished with Future’s sell-out to Reliance. 

Amazon on its part, however, hasn’t taken Biyani’s move too kindly and has legally challenged the deal, which could act as a spoiler to the new liaison. As analysts point out, if nothing else, it could at least delay the execution of the deal. The parties involved are tight-lipped, resulting in a host of speculative theories. 

Some reports suggest that Amazon, which had picked up 49 per cent in Future Coupons last year (an unlisted entity controlled by Future Retail) at a reported price of about Rs1,500 crore, has also got 5 per cent ownership of Future Retail in the bargain, which now goes to Reliance. A strong theory doing the rounds suggests that, while beginning a formal partnership with Future, Amazon had strongly put the condition that Biyani will not get into any partnership with Mukesh Ambani’s retail firm in future.

And by doing so, Amazon was protecting its interest. Like many others, Amazon would have well imagined that Reliance, with its strong offline presence, strong online ambitions, the possible support of Future group’s assets (fully or partially) and the larger planned convergence play with Jio, would get miles ahead of others in the organised retail game. 

Amazon is believed to have engaged AZB Partners to take up the case against Future group at the Singapore International Arbitration Centre (SIAC), where the global e-commerce giant may seek hefty damages for breach of contract. Future group has hired the services of Harish N. Salve. As and when the actual legal proceedings begin, Amazon legal team is expected to emphasise the point that its earlier deal with Future had accorded it with a call option to partially or fully acquire Future group promoters’ shareholding in Future Retail between the third and 10th year after its investment in Future Coupon. Future’s legal counselors, on the other hand, are likely to counter Amazon’s claim, saying that only listed entities like Future Retail and Future Lifestyle have been handed over to Reliance and not Future Coupons, where Amazon had invested. 

Firing the first salvo

The moot point is: why did Amazon choose to fire the salvo after Reliance and Future inked the formal deal? The final negotiations between the two domestic retail majors had gone for quite some time. So, why did Amazon prefer to stay silent during the making of the second biggest retail deal in India 

“With the best legal brains at their command, it’s difficult to believe that it could simply be a case of over-sight on the part of any one of them,” observes Ankur Bisen, Senior VP, Technopack Advisors. “Amazon, with over 35 per cent share in the nearly $30 billion Indian e-commerce market, is quite comparable to Reliance-Future combine in the offline space. Despite the emergence of the Walmart-Flipkart combine and now Reliance-Future formation, there is no dilution in its ambition to make India a major global turf for its business,” Bisen adds, while asserting that the case would eventually head to an out of the court settlement.

 

Amazon will go the extra mile to protect its interests. “After having failed in China, India is clearly the turf of high expectations for Bezos,” feels an analyst of a leading research and consultancy firm. “Just imagine, had there been no Walmart-Flipkart deal, Amazon would have already become the undisputed leader of India’s e-commerce business. They have committed a staggering investment of over $6.5 billion to India and they will do anything under their command to put themselves in an advantageous position vis-à-vis competition”. 

According to legal experts, Amazon’s bid to challenge Reliance-Future deal in an international court isn’t much surprising. “In the corporate war between the giants, these are usual occurrences and acting at an opportune time is critical. As for this specific case, while it can delay the fruition of Reliance-Future agreement, Amazon may be looking at an opportunity to ultimately bargain for some equity presence in Ambani’s retail business for the settlement,” observes Rakesh Pathak, a Delhi-based corporate lawyer. 

Meanwhile, ever since the development, Future group’s listed entities (Future Lifestyle and Future Retail) have taken some beating at the bourses. On the day when Amazon played its legal card, even RIL share dipped by 0.81 per cent.

Don't miss this

Corporate Report

IntelliSmart: All charged up

IntelliSmart is playing a pivotal role in the smart metering drive in the country

Corporate Report

Anarock scripts a success story

Anarock is betting big on the rapidly-growing domestic realty market

Special Report

Riding the downturn in the markets

A downslide in the market may be viewed as a good buying opportunity for long-term investors

Cover Feature

India faces a double whammy

India is now facing a dual problem of low growth and high inflation

Our letter to you, once a week.
Register with The CSR Weekly for free!

E-MAGAZINE
Double Whammy
Commodity boom
Adani's biggest bet
FROM THIS ISSUE

Selections

Wellness

F&B

Feature

Corporate Report

Corporate Report

Social Responsibility

Company Feature

Classrooms go live, thanks to Airtel

Published on April 5, 2022, 11:25 a.m.

Despite the pandemic, Bharti Foundation has ensured that children are not deprived of learning opportunities

Column

Collaborative excellence

Published on April 4, 2022, 8:53 p.m.

A policy perspective for meeting SDG-9 in low resource setting of developing economies

Column

Innovation and infrastructure

Published on April 4, 2022, 8:10 p.m.

India is well-positioned to become a model of corporate sustainability

Column

‘More for less’

Published on April 1, 2022, 10:12 p.m.

The merger of technology and SDGs – A game-changing win of the era

Climate Change

Collaboration

IRENA, Opec ramp up RE transition

Published on June 22, 2022, 2:01 p.m.

Both agree to mobilise finance, unlock investment and support project development

Mobility

A surge in hydrogen vehicles

Published on June 22, 2022, 1:11 p.m.

The consumer market is expected to lead the hydrogen vehicles space

Disasters

Climate migration wreaks havoc

Published on June 22, 2022, 12:51 p.m.

Climate change drives millions out of their homes

Government and Policy

Investors back UP’s green energy push

Published on June 22, 2022, 12:15 p.m.

Investment proposals galore in the state

Stay ahead of the times.
Register with The Climate Change Weekly for free!