In a major setback to Amazon, the National Company Law Appellate Tribunal (NCLAT) on Monday rejected the US e-commerce giant's appeal against an antitrust suspension of its investment deal with Future Group, saying the retailer had not made full disclosures at the time of seeking approval.
NCLAT also upheld a Rs 200 crore penalty imposed on Amazon by the Competition Commission of India (CCI) and asked the e-commerce giant to deposit the same in 45 days.
It supported the CCI findings that Amazon didn't make full disclosures regarding the deal with Future Retail subsidiary - Future Coupons Pvt Ltd (FCPL).
In its order, NCLAT said, "Amazon has not made full, whole, forthright and frank disclosures of relevant materials. It had furnished only limited disclosures pertaining to acquiring its strategic rights and interest in FRL (Future Retail Ltd)" and executing the commercial contract.
"In this regard, this appellate tribunal is in complete agreement with the view arrived at by the first respondent (CCI)," said the NCLAT bench comprising Justice M. Venugopal and Ashok Kumar Mishra.
The competition watchdog had on December 17, 2021, levied a Rs 200 crore penalty on Amazon and suspended its deal with Future, stating that the US firm deliberately suppressed the actual scope and purpose of the 2019 investment and made false and incorrect statements. Amazon had challenged the decision, arguing that it had not concealed any information.
Amazon.com NV Investment Holdings LLC (Amazon), a direct subsidiary of Amazon.com Inc, had in 2019 acquired 49 per cent shareholding in FCPL, which in turn held 9.82 per cent interest in FRL.
Citing its indirect shareholding in FRL, Amazon had opposed the sale of its retail assets to Reliance Industries for Rs 24,713 crore.
The CCI order had stated that Amazon had not disclosed its interest in FRL while seeking approval for its investment in FCPL.
NCLAT upheld the CCI view but reduced a separate penalty of Rs 1 crore each imposed under Sections 44 and 45 to Rs 50 lakhs each.
Amazon has been directed to pay the penalties and file a fresh Form 2 within 45 days.
"This appellate tribunal based on the relevant facts and circumstances of the case, mainly the availability of the competitions in the market and financial health of the industry... imposes a penalty of Rs 50 lakh each as per sections 44 and 45 of the competition act 2002," NCLAT said directing Amazon to pay Rs one crore within 45 days calculated from the date of passing of judgment.
But NCLAT upheld the Rs 200 crore penalty imposed on Amazon.com NV Investment Holdings LLC (Amazon) - a direct subsidiary of Amazon.com Inc - for failure to notify the combination in the requisite terms.
"As regarding the non-furnishing of the information, namely the appellant (Amazon) omission for the lapse and for failure to notify the combination as per the obligatory required under section 6 (2) of the act (the Competition Act, 2002), this tribunal holds that appellant Amazon was at the failure to provide the relevant information on the combination.
"Being responsible and accountable in not giving notice as required under this regard, this tribunal to secure the ends of justice, is not displacing the imposition of penalty of Rs 200 crore levied upon Amazon by CCI in the impugned order since the same is fair and sensible as per section 43 (a) of the act," said NCLAT while pronouncing its order orally in the virtual court.
In August 2019, Amazon had agreed to purchase 49 per cent in unlisted Future Coupons, which owns 7.3 per cent equity in listed Future Retail through convertible warrants, with the right to buy into the flagship Future Retail after a period of 3 to 10 years. The deal size was around Rs 1,400 crore.
FRL is presently facing an insolvency petition before the Mumbai bench of the National Company Law Tribunal by its lender after it committed defaults.
NCLAT concluded its hearing in April this year, over Amazon's plea after all parties filed revised notes of submissions along with relevant citations before the registry.
Apart from Amazon's plea, the Confederation of All India Traders (CAIT) and All India Consumer Products Distributors Federation (AICPDF) also filed pleas in the matter.
FRL was part of the 19 group companies operating in retail, wholesale, logistics and warehousing segments, which were supposed to be transferred to Reliance Retail as part of a 24,713 crore deal announced in August 2020.
The deal was called off by the billionaire Mukesh Ambani-led Reliance Industries Ltd in April.
While commenting on the development CAIT welcomed the NCLAT order and said any move to captivate Indian e-commerce and retail trade by anyone will not succeed under any circumstances.
"NCLAT Judgment is a vindication of CAIT's stand which was consistently highlighted the brazen anti-competitive practices and violations of law by Amazon, including its actions of deep-discounting, B2C e-commerce and the manner in which it has entered the retail trading sector through its acquisitions of More Retail Ltd. and FRL," the trader body said in a statement.
The NCLAT upheld the Rs 200 crore penalty imposed on Amazon for failure to notify the combination in the requisite terms, saying it is a "fair and sensible one".
"As regards the non-furnishing of information viz., Amazon's omission/ lapse/ failure to notify the 'Combination' as per the obligation required under the ingredients of Section 6 (2) of the Competition Act, 2002, this Tribunal holds Amazon...responsible and accountable in not giving 'Notice' as required," it said.
The NCLAT, which is an appellate authority under the Competition Act, justified the amount by saying under Section 43A such violations attract penalty extending to 1 per cent of the total turnover or the assets, whichever is higher, of such a combination.
It also rejected Amazon's submission that CCI can not revoke or keep the approval order of November 28, 2019 on hold or in abeyance or issue a direction to file Form II and said that the regulator "has an incidental/ ancillary/ residual power to pass an 'Order' of keeping the 'Approval Order' dated 28.11.2019 passed by CCI in abeyance / or to put it on hold."
The NCLAT also dismissed the pleas filed by CAIT and AICPDF.
