Amazon Moves Supreme Court Challenging CCI's Decision To Revoke Approval For Deal With Future Coupons

In the impugned order passed on 13.06.2022, NCLAT had also upheld that direction of the CCI to Amazon to pay Rs. 200 Crores penalty under Section 43A of the Competition Act, 2002. The NCLAT has directed Amazon to deposit the penalty within 45 days and comply with the CCI order. It had held -

"This `Tribunal', to secure the `ends of justice' is not displacing the imposition of penalty of INR Rs.200 Crore levied upon the `Appellant/Amazon' by the `1st Respondent/CCI' in the `impugned order' dated 17.12.2021, since the same is a fair and sensible one, as per Section 43A of the Competition Act, 2002. As such, this `Tribunal' directs the `Appellant/Amazon' to pay the sum of Rs.200 Crore within 45 days from today, Also, this `Tribunal' directs the `Appellant/Amazon' to give notice to the `1st Respondent/CCI' in `Form II' within 45 days from today (the date of passing of this `Judgment') and till the disposal of such notice, by the `1st Respondent/CCI', the `Approval' granted on 28.11.2019 (vide Combination Registration No.C-2019/09/688), shall be `kept on hold'."

On Monday(September 5), the matter was listed before a Bench comprising Justices Dinesh Maheshwari and M.M. Sundresh. The Registry was directed to list the matter next on 19.09.2022. The Bench asked the Counsels for the parties to submit short notes of their submissions within a period of one week. 

Amazon.com NV Investment Holdings LLC ("Amazon"), a subsidiary of Amazon.com Inc. Amazon wanted to notify a 'Combination', to the CCI through a Notification dated 23.09.2019 ("Notice"), as per Section 6(2) of the Competition Act, 2002, in Form I of Schedule II to the CCI (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 ("Combination Regulations").

The Combination was with respect to acquiring 49% shareholding in Future Coupons Pvt. Ltd. (FCPL) alongwith other transactions. Precisely, it entailed three transactions -

1. issuing of 9,183,754 voting equity shares of Future Coupons Pvt. Ltd ("FCPL") to Future Coupons Resources Private Limited ("FCRPL");
2. transfer of 13,666,287 shares of Future Retail Limited (FRL) held by FCRPL to FCPL
3. acquisition of the Subscription Shares representing 49% of the total issued, subscribed and paid-up equity share capital of FCPL (on a Fully Diluted Basis) by Amazon, by way of a preferential allotment.

While notifying the Combination, Amazon seems to have informed CCI, that it did not have any direct or indirect shareholding in FRL and it would not acquire directly any rights in FRL. It had only limited investor protection rights in FCPL with a view to protect the value of its investment in FCPL. These rights can be exercised through FCPL and not directly by Amazon. Based on the information furnished by Amazon, the CCI had granted approval to the 'Combination' vide an order dated 28.11.2019.

An organization of retailers named CAIT(Confederation of All India Traders) had made a complaint to the CCI against the Amazon-Future deal. FCPL filed an application before the CCI under Sections 43A, 44 and 45 of the Competition Act, 2002 (Act, 2002), in relation to the acquisition of 49% shareholding in FCPL by Amazon. It apprised CCI that Amazon has initiated arbitration proceedings in relation to transfer of assets of FRL, a company in which FCPL holds 9.82% of the shareholding. It invoked arbitration proceedings in Singapore to halt Future Retail's deal with the Reliance group. It invoked arbitration proceedings in Singapore to halt Future Retail's deal with the Reliance group and there were related litigations pending before the constitutional courts. It was alleged that Amazon's stands in the arbitration proceedings and constitutional courts with respect to its investments in FCPL, is contrary to its representations and submissions made before the CCI. Allegations of false representation and suppression of material facts were raised before the CCI.

The CCI was of the prima facie view that Amazon failed to identify and notify FRL Share Holding Agreement as a part of the 'Combination', in terms of Regulation 9(4) and Regulation 9(5) of the Combination Regulations; Amazon had concealed its strategic interest over FRL; and Amazon had made false and incorrect representations and concealed/suppressed material facts in contravention of the provisions of the Act, 2002. Accordingly, the CCI had issued a Show Cause Notice under Sections 43A, 44 and 45 of the Act, 2002 to Amazon.

Eventually, in its final order dated 17.12.2021, the CCI had concluded that Amazon had suppressed "the actual purpose and particulars" of the 2019 deal and sought to "establish false representation and suppression of material facts". It was observed that it was necessary to examine the deal afresh and hence its approval "shall remain in abeyance" until then.

The CCI had also imposed a penalty of Rs. 200 Crore on Amazon for failing to identify and notify the FRL Shareholders Agreement as a part of the deal, which was an obligation under Section 6(2) of the Competition Act, 2002.

In appeal, the NCLAT upheld that Amazon in order to conceal its violations, had intentionally concealed the `real ambit and purpose' of the `Combination'. It observed that Amazon had failed to provide the relevant information on the `Combinations' being responsible and accountable in not giving `Notice' as required and in this regard.

[Case Title: Amazon.com NV Investment Holdings LLC v. Competition Commission of India & Ors. CA (No) 4974 of 2022]

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