The National Company Law Appellate Tribunal (NCLAT), which rejected Amazon’s appeal against the Competition Commission of India’s (CCI) decision to keep the approval granted to the e-commerce giant’s deal with Future Coupons in abeyance, has been challenged by NV Investment Holdings LLC (Amazon) in the Supreme Court.
The Competition Commission of India (CCI) had directed Amazon to pay a fine of Rs. 200 crore under Section 43A of the Competition Act, 2002, and NCLAT had affirmed that decision in the contested ruling issued on June 13, 2022. Amazon has been told by the NCLAT to deposit the fine and follow the CCI directive within 45 days. It was held – “The imposition of a penalty of INR Rs. 200 crore levied on the “Appellant/Amazon” by the “1st Respondent/CCI” in the “impugned order” dated 17.12.2021, as per Section 43A of the Competition Act, 2002, is not being replaced by this “Tribunal” in order to uphold the “goals of justice.” As a result, this “Tribunal” orders the “Appellant/Amazon” to pay the sum of Rs. 200 crore within 45 days from today. Additionally, this “Tribunal” orders 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 until the disposal of such notice, by the “1st Respondent/CCI”, the “Approval,” which was given on November 28, 2019, will be “put on hold” (per Combination Registration No. C-2019/09/688). The case was scheduled to be heard by a bench of Justices Dinesh Maheshwari and M.M. Sundresh on Monday, September 5. On September 19, 2022, the Registry was instructed to list the matter next.
The Bench gave the parties’ attorneys one week to produce concise summaries of their arguments. Amazon.com NV Investment Holdings LLC is an affiliate of Amazon.com Inc. According to Section 6(2) of the Competition Act of 2002, Amazon wished to notify the CCI of a “Combination” by a notification dated September 23, 2019 (the “Notice”), in accordance with the CCI (Procedure in regard to the transaction of business pertaining to combinations) Regulations of 2011. (“Combination Regulations”). The Combination involved many transactions and the purchase of a 49% ownership in Future Coupons Pvt. Ltd. It involved three transactions specifically: The issuance of 9,183,754 voting equity shares of Future Coupons Pvt. Ltd. (“FCPL”) to Future Coupons Resources Private Limited (“FCRPL”); the transfer of 13,666,287 shares of Future Retail Limited (FRL) held by FCRPL to FCPL.
Amazon purchasing the Subscription Shares through a preferential allocation, which together comprise 49% of FCPL’s issued, subscribed, and paid-up equity share capital (on a fully diluted basis). Amazon appears to have told CCI, when informing the Combination, that it had no direct or indirect ownership in FRL and that it would not directly acquire any interests in FRL. To safeguard the value of its investment in FCPL, it only had a few restricted investor protection rights. FCPL, not Amazon, is the channel via which these rights may be exercised. In a ruling dated November 28, 2019, the CCI approved the “Combination” based on the data provided by Amazon.
Confederation of All India Traders, a group of retailers, had complained to the CCI about the Amazon-Future agreement. In regard to Amazon acquiring a 49% stake in FCPL, FCPL filed a request with the CCI under Sections 43A, 44, and 45 of the Competition Act, 2002 (Act, 2002). It informed CCI that Amazon had opened an arbitration case regarding the transfer of assets from FRL, a business in which FCPL owns 9.82% of the stock. To put an end to Future Retail’s agreement with the Reliance group, it referred the matter to arbitration in Singapore. To stop Future Retail’s agreement with the Reliance group, it triggered arbitration proceedings in Singapore, and associated legal disputes are still unresolved before the constitutional courts. The argument advanced against Amazon was that its positions in the arbitration hearings and constitutional courts about its investments in FCPL are different from those it stated to the CCI. Before the CCI, accusations of deceptive representation and the omission of crucial facts were made.
The CCI initially believed that Amazon had violated the Act of 2002’s provisions by failing to identify and notify the FRL Share Holding Agreement as a component of the “Combination” in accordance with Regulations 9(4) and 9(5) of the Combination Regulations, concealing its strategic interest in FRL, and making false and incorrect representations and concealing/suppressing material facts. As a result, the CCI had sent Amazon a Show Cause Notice in accordance with Sections 43A, 44, and 45 of the Act, 2002. Ultimately, the CCI found that Amazon had concealed “the actual purpose and particulars” of the 2019 contract and had attempted to “establish false representation and concealment of material information” in its final order dated 17.12.2021. It was noted that a further review of the agreement was required, therefore its approval “must stay in abeyance” until that time. Amazon was also fined Rs. 200 crore by the CCI for failing to disclose the FRL Shareholders Agreement as a component of the purchase, which was required by Section 6(2) of the Competition Act of 2002.
The NCLAT confirmed that Amazon had purposefully obscured the “true ambit and purpose” of the “Combination” in order to hide its infringement. It was noted that Amazon had failed to disclose the necessary details regarding the “Combinations” being accountable and responsible for failing to offer the necessary “Notice” in this regard.