An ugly back and forth is brewing between Amazon and Indian retailer Future Retail Limited (FRL) as the latter looks to offload assets to a budding rival to the e-commerce giant.
On Oct. 25, Amazon won an injunction from an arbitrator in Singapore that would prevent FRL—in which Amazon holds a minority stake—from selling its retail, wholesale and logistics businesses to fellow Indian retail giant Reliance Industries for $3.4 billion. But FRL said on Sunday that the arbitrator’s order is not enforceable under Indian law and not binding on the company. Lawyers from Future Retail have argued that the enforcement would have to be ratified by an Indian court, while Amazon believes the order is binding.
FRL told the arbitrator while arguing against Amazon’s injunction that it would go into liquidation and sacrifice 29,000 jobs if its deal to sell the assets to Reliance fails. The retailer, which operates more than 1,500 stores across 400 Indian cities, has argued it entered into the deal with Reliance because its retail business was severely hit during the Covid-19 pandemic and it was critical to protect all its stakeholders. The retail unit includes brands like Big Bazaar, a well-known, popular hypermarket chain in India.
The e-commerce giant filed a legal suit against Future Retail, alleging that the Indian retailer breached contractual provisions it agreed to in a separate deal with the U.S. tech giant.
Amazon argued that a 2019 deal it forged with a Future unit, in which the U.S.-based online giant invested $200 million in the Indian company, contained clauses stipulating that the group couldn’t sell its retail assets to anyone on a “restricted persons” list including any firms from Mukesh Ambani, the CEO of Reliance and India’s richest person. The deal specified any disputes would be arbitrated under Singapore International Arbitration Centre rules.
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In response to the suit, “FRL is also in the process of taking appropriate legal action to protect its rights,” Future Retail said in a regulatory filing.
It is notable that Amazon showed interest in purchasing a 26 percent minority stake in Reliance before entering its partnership with Future Retail. In 2019, Amazon acquired a 49 percent stake in Future Coupons, which came with a 3.58 percent stake in Future Retail and the right of first refusal to acquire more shares in the company. As of Sept. 30, Amazon’s stake in Future Retail sits at roughly 4.8 percent.
Reliance Retail has more than 12,000 stores throughout India and is set for even larger growth, receiving a $1 billion investment from U.S. private equity firm Silver Lake in May and then procuring $750 million in funding from investment firm KKR & Co. in late September. Last year, Reliance acquired British toy store Hamleys from Hong Kong-based C.banner International for about $86.7 million.
Reliance was also previously floated as a potential suitor to acquire Debenhams out of administration, but Ambani reportedly dropped out of the running last month.
In an Oct. 28 letter to Securities & Exchange Board of India (SEBI) Chairman Ajay Tyagi that was acquired by Reuters, Amazon said Future’s news release and stock exchange disclosures violated Indian regulations, alleging that Future Retail misled shareholders by incorrectly saying it was complying with its contractual obligations to the U.S. e-commerce giant. Amazon urging the regulator to investigate the matter and not approve the deal.
Reliance, despite the arbitrator’s decision, indicated in a statement that the company entered into the transaction for acquisition of assets and business of Future Retail Limited under proper legal advice and the rights and obligations are fully enforceable under Indian Law.
“Reliance Retail Ventures Limited (RRVL) intends to enforce its rights and complete the transaction in terms of the scheme and agreement with Future group without any delay,” the statement said.
Amazon has made big strides of its own in India in its most recent quarter, expanding its operations network in the country with 10 new fulfillment centers, five new sortation centers, nearly 200 delivery stations and over 100,000 seasonal jobs to help meet customer demand. The Future Retail sale would put a dent in the physical presence that Amazon could leverage alongside its fulfillment capabilities as it aims to bolster its presence in a growing market.
Over the next two years, India’s e-commerce sector is anticipated to be worth nearly $72 billion dollars, according to eMarketer. The tech giant hopes to export $10 billion worth of India-made goods around the world by 2025, but still faces regulatory headwinds in India related to antitrust probes and foreign investment.
India is attempting to be more stringent about the e-commerce playing field as companies like Amazon, Reliance Retail and Walmart’s Flipkart continue to gain growth throughout the country. In July, the Indian government installed an e-commerce regulator, alongside policy changes designed to mandate government access to online companies’ source codes and algorithms to combat “digitally induced biases” by competitors.