🥊 Has Amazon lost the Future Fight?

Amazon has been feuding with the Future Group for quite some time now. But a new decision changes everything.

The world's second-richest man, Jeff Bezos, is used to getting whatever he wants.

And when he doesn't, he sues.

When he didn't get a contract with the US government or with NASA, he sued to get his way. 

More recently his company tried the same tactic with Future Group.

But you see, justice isn't for sale (usually). So, even Amazon has to accept defeat. And this time a company, which has a valuation of less than 1% of Amazon, has won: Mumbai-based Future Group.

The Competition Commission of India has ruled that Amazon's 2019 deal with Future Group was invalid. And this ruling has made life easier for another billionaire: Reliance Group's Chairman Mukesh Ambani.

The Backstory

The tale began in 2019. The Competition Commission of India had just given Amazon permission to buy a 49% stake in Future Coupons for Rs. 1,500 crores. 

For Amazon, the deal was just a way to get to Future Retail.

You see, Future Coupons is a promoter of Future Retail (part of the Future Group), and so by buying a 49% stake in Future Coupons, Amazon automatically (and indirectly) got a 3.58% stake in Future Retail.

Umm, guys, that's a really tiny amount. What good would that be to the trillion-dollar Amazon?

Well, Amazon knows how to play the long game. That's literally the company's business model (but that's a story for another day). 

The deal gave Amazon the right to buy all of the Future Coupon's stake (7.3%) in Future Retail three years after the deal. The offer would be valid till 2029. 

Everybody was happy with the deal. Future Retail especially. Because it had massive loans worth around Rs. 3,500 crores. The deal would not only give it cash to pay off some of these debts but also expose it to the digital world.

Because part of the deal was that Amazon would list Future Retail products on its marketplace (yes, the deal had a lot of clauses and this is exactly what caused the feud later on). 

So, Future Retail would get an online presence and Amazon would get an offline presence through Future Retail's stores like Big Bazaar.

Win-win, right? If only.

The Conflict

Both parties were basking in the glow of their new deal but then the pandemic struck. And while Amazon made crazy money because of the onslaught of online orders, Future Retail's stores were mostly empty due to Covid fears.

The company's debts got worse and worse (amounting to almost Rs. 11,250 crores) and Amazon didn't provide any help.

But one billionaire's loss is another billionaire's gain.

Enter: Mukesh Ambani.

Ambani saw this as a great opportunity to expand Reliance's retail business. Instead of building its own stores and warehouses, he thought it was much easier to just buy those from Future Retail. And the company agreed, it was desperate to pay off its debts. 

So, in August 2020, a deal worth Rs. 24,713 crores was struck. 

Here's where the problem started. Amazon had probably envisioned a future where it would buy off Future Group's assets after getting a higher stake in the company. But Ambani jumped in first, and the early bird got the worm.

This obviously ruined Amazon's plans. However, it had a sneaky ace up its sleeve.

You see, the terms of Future Coupon's deal with Amazon also prevented the company from selling its assets to any rival company, including Reliance.

Now the Future Group claimed it wasn't aware of this clause. 

Cue: Epic Legal Battle of Massive Proportions.

Seriously, the two companies have been to multiple courts including one in Singapore.

These various courts gave various different verdicts, some agreeing with Amazon and some with Future.

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But the CCI has brought an abrupt halt to this entire drama. How? 

You see, the CCI is here to make sure that a healthy competitive environment exists in India and no company can take undue advantage of its position.

So, this CCI, which had greenlit Amazon's deal initially, has now claimed the deal was made under false pretences.

It said that Amazon had not disclosed its original purpose when striking the deal: its interest in Future Retail.

When Amazon had proposed the deal it had only said that it was interested in bridging the gaps in India's payment structure through Future Coupons. There was "a deliberate design on the part of Amazon to suppress the actual scope and purpose of the" deal. 

 So CCI does not approve the deal anymore and will review it again. And to add salt to the wound, it is also fining Amazon Rs. 200 crores for lying.

Now that the deal is potentially invalid, Future can get away with selling its assets to Reliance.

But picture abhi baaki hai. Amazon can still challenge the CCI's decision. However, there's a high chance it will have to accept defeat.

Time to celebrate a great Indian victory, then?

Well, no. Amazon is a powerful friend but also a powerful foe. The company invested over Rs. 11,400 crores in India in 2019-2020. But after this humiliating defeat, it could cut down on its investments.

Not just that, this could also spook other foreign investors from investing in India. 

The move has also made Reliance even more powerful in India, giving it a stronghold over the retail sector.

How will this move shape up India’s retail landscape?

Only time will tell…

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