CCI Approves Acquisition of Retail and Wholesale Undertaking and Logistics and Warehousing Undertaking of the Future Group by Reliance

On November 20, 2020, the CCI approved the acquisition of the (i) retail and wholesale undertaking  (‘RWU’); and (ii) the logistics and warehousing undertaking (‘LWU’) of the Future Group (collectively, ‘Target Businesses’) carried out through various entities of the Future Group, by Reliance Retail Ventures Limited (‘RRVL’) and Reliance Retail and Fashion Lifestyle Limited (‘RRVL WOS’) (collectively, ‘Acquirers’) respectively.[1]

The Target Businesses were carried out by the following Future Group entities, namely, Futurebazaar India Limited (‘FIL’) and its subsidiaries, Future Consumer Limited (‘FCL’), Future Lifestyle Fashions Limited (‘FLFL’), Future Retail Limited (‘FRL’), Future Market Networks Limited (‘FMNL’) and Future Supply Chain Solutions Limited (‘FSCSL’) (collectively, ‘Transferor Companies’). The combination involved the following steps:

i.     Internal Restructuring by Future Group: Consolidation of the Target Businesses by amalgamating them into Future Enterprises Limited (‘FEL’).

ii.    Acquisition of the Target Business: Transfer of the LWU from FEL to RRVL and transfer of the RWU from FEL to RRVL WOS on a slump sale basis.

iii.  Investment by RRVL WOS in the remaining business of FEL (Remaining Business): The Remaining Business of FEL consists of manufacturing (including through contract manufacturing) and processing of fast moving consumer goods (‘FMCG’) products, processed food, and apparels and their distribution to third-party wholesalers and retailers (other than through online or physical stores), certain investments and interest in certain immovable and movable properties/assets. RRVL WOS would invest in the Remaining Business of FEL by subscribing to a mix of equity shares and warrants FEL in the aggregate, up to 13.14% of the total equity share capital of FEL.

RRVL, a subsidiary of Reliance Industries Limited (‘RIL’), is engaged in the business of retail supply chain management. Reliance Retail Limited (‘RRL’), a subsidiary of RRVL, undertakes retail operations in India across segments such as food and grocery, consumer electronics, apparel, footwear, and accessories. RRL operates its retail businesses (online and offline) through a chain of stores spread across India which includes Reliance Fresh, Reliance Smart, Reliance Digital, etc.

RRVL WOS, a wholly-owned subsidiary of RRVL, has been recently incorporated to carry out various businesses including the businesses proposed to be transferred to RRVL WOS post the acquisition of the RWU.

The Future Group consists of several companies engaged primarily in retail and wholesale business as well as logistics and warehousing business that operate on a pan-India basis. Their business includes retail operations across segments such as food and grocery, apparel, footwear and accessories, home furnishings, other merchandise, etc. It operates its retail businesses through a chain of stores spread across India which include Big Bazaar, Central, Brand Factory, Foodhall, etc. The Future Group also manufactures various food and grocery products and sells these products under different brand names to end consumers through their retail store chains. FEL, a part of the Future Group, is engaged in the business of manufacturing and sourcing of fashion merchandise.

The following horizontal overlaps were identified: (i) at the broad level, the market for retail/B2C retail in India, and at a narrower level, in the sub-segments of retail for food & grocery (‘F&G’), apparel, footwear and accessories (‘AFA’), and general merchandise (‘GM’) in India, and in cities/towns where both the parties are present; (ii) at the broad level, the market for wholesale/B2B sales in India; and (iii) third-party logistics (‘3PL’) activity of FSCSL and last mile delivery service of Grab A Grub Services Private Limited (‘Grab A Grub’) (an indirect subsidiary of RIL).

With respect to the B2C market, the CCI assessed the relevant geographic market on a: (i) pan-India basis; (ii) city-wise basis; and (iii) five kilometer catchment level, for certain product categories.

The CCI noted that unorganised retail sector in India exerts competitive constraint on the organised retail. Further, at the pan-India level, the combined market shares of the parties was in the range of 0-5% in the overall retail market for the FY 2019-20.

i.     In the F&G segment, the CCI further noted that this segment is largely dominated by kirana stores and that the nature of the products under F&G retail (based on parameters like quality, packaging, taste, colour, etc.) are homogenous across brands, regardless of the medium/point of sale. At the city-wise level, the overlaps between the parties were in 120 cities where their combined market shares did not exceed 10% in any city, with incremental share remaining within the range of 0-5%. The CCI also noted the presence of existing large players and new players in the segment.

ii.    In the AFA segment, the CCI assessed the overall AFA retail (as opposed to further segmenting it between organised and unorganised sectors) since the differentiated nature of AFA products and different retail formats do not allow a clear demarcation between organised and unorganised AFA retail. The CCI also noted that the AFA segment is dynamic in nature and continuously adapts to changing trends and consumer preferences. At the city-wise level, the overlaps between the parties were in 162 cities and towns where their combined market shares did not exceed 10% in any city, with incremental share remaining within the range of 0-5%.

iii.    In the GM segment, the CCI noted that GM is typically other non-food consumer goods, primarily sold by F&G, such as books and stationery, floor mats, batteries and bulbs, home furnishings, etc. Observing the lesser relevance of brands in this segment and the comparable availability of the range of products across retail formats, the CCI noted that the unorganised retail segment may provide sufficient competitive constraint to the organised segment. Further, at the city-wise level, the overlaps between the parties were in 119 cities and towns where their combined market shares were less than 10%, with incremental share remaining within the range of 0-5%.

In the B2B market, the CCI ultimately considered the following relevant product markets: (i) overall wholesale market; and (ii) narrower segments of F&G, AFA, and GM. The relevant geographic markets were considered on a: (i) pan-India basis; and (ii) city-wise basis.

The CCI noted that no competition concerns would arise since the overlaps between the parties were limited to the F&G segment and the post combination market share of the parties in the B2B sales market as well as in all the overlapping segments would be between 0-5%. The CCI also noted the competitive pressure exerted by unorganised wholesalers, the low entry barriers, as well as the presence of players such as Indiamart, Walmart, Amazon, Alibaba, Ninjacart, TradeIndia, etc. in this market.

For the 3PL market, the CCI held that the said overlap would not lead to any competition concerns as the market share of FSCSL in the 3PL segment in India is in the range of 0-5% and the segment has seen the entry of several new players such as E-Kart, Gati Limited, etc. Further, Grab A Grub’s total income during FY 2019-20 was minuscule.

The parties also identified vertical overlap between (i) the last mile delivery services of Grab A Grub and merchandise sale business of Target Businesses; and (ii) 3PL services of FSCSL and last
mile delivery services of Grab A Grub.  The CCI however noted that the value of service procured by Target Businesses from Grab A Grub were insignificant to raise any concern. Further, the market for last mile delivery services is characterised by the presence of numerous players in India such as Shadowfax, Delhivery, Ecom Express, etc. Accordingly, the CCI granted approval.


[1] Combination Registration No. C-2020/09/771.

Published In:Inter Alia Special Edititon - Competition Law - March 2021 [ English
Date: March 15, 2021