A legal spat between Amazon.com Inc. and its Indian partner that started before an arbitrator in Singapore just got fiercer in a court in New Delhi.
The U.S. e-commerce giant and Future Group, whose assets billionaire Mukesh Ambani’s Reliance Industries Ltd. recently agreed to buy for $3.4 billion, are locked in a dispute over that deal. Amazon says Future violated a contract with the sale to its rival and wants to halt it, while the indebted Mumbai-based firm says it would collapse if the transaction were to fail.
The Jeff Bezos-led e-tailer has accused Future and its founder Kishore Biyani of flouting disclosure rules, according to court filings seen by Bloomberg. Future’s disclosures were “made as per the applicable requirements,” the company said in an email, refuting the allegations. Amazon has also written to the Competition Commission of India asking it not to approve the takeover until arbitration proceedings are complete.
While Amazon, Future and Reliance await a verdict, the legal wrangling is threatening to unravel India’s biggest retail acquisition. But why is the world’s largest e-commerce company seeking to derail a deal that’s essentially bailing out a beleaguered retailer, whose market valuation is barely 2% of its own? Here’s what we know so far:
Amazon, in early October, accused its partner Future Group of breaching terms of a mutual agreement by announcing an asset sale deal with Reliance, the conglomerate helmed by Asia’s richest man.
Amazon had bought 49% in one of Future’s unlisted firms last year, with the right to buy into the listed flagship Future Retail Ltd. after a few years. But the retailer ran into a severe cash crunch when India went into a lockdown in March to curb the coronavirus outbreak.
In May, Amazon was considering increasing its stake in Future Retail, people familiar with the matter said at the time. But no such transaction materialized quickly and Future cut a deal with Reliance, infuriating Amazon. The U.S. firm claims that its contract with the unlisted Future unit barred a transaction with a number of persons and companies, including Ambani and Reliance.
The fight is essentially for the dominance of India’s estimated $1 trillion consumer retail market. Future Group is caught in the middle of this tussle between companies helmed by two of the world’s richest men.
Ambani Wages Price War With Amazon for $200 Billion India Prize
Reliance is already the country’s biggest brick-and-mortar retailer. Acquiring Future’s retail, wholesale, logistics and warehousing units would almost double its footprint and give it unparalleled edge over rivals -- an advantage Amazon is not willing to cede. Blocking Reliance is crucial for Amazon if it wants to hold sway over the only billion-people plus consumer market still open to foreign firms. It has pledged to invest $6.5 billion, a sign of its commitment to the Indian market.
After accusing Future of breaching its contract, Amazon secured emergency relief from an arbitration court in Singapore on Oct. 25 that temporarily restrained Future Group from going ahead with the asset sale.
(With inputs from agencies)