On December 17, 2021, CCI imposed a penalty of Rs 200,00,00,000 under Section 43A of the Act and Rs 2,00,00,000 under Sections 44 and 45 of the Act for its failure to identify and notify its strategic interest over Future Retail Limited (‘FRL’), while requesting approval for its acquisition of 49% shareholding in Future Coupons Private Limited (‘FCPL’).
On September 23, 2019, Amazon.com NV Investment Holdings LLC (‘Amazon’), a direct subsidiary of Amazon.com Inc, filed a notice regarding the acquisition of 49% of shareholding in FCPL (‘Transaction’). As part of the Transaction, Amazon also acquired a right in FCPL through which it would require Amazon’s prior written consent for FCPL to decide on or implement any matter under the shareholders agreement with FRL. FCPL holds 9.8% equity shares in FRL (‘FRL Rights’). The notice filed by Amazon also included certain disclosures regarding its existing and contemplated business arrangements with FRL regarding listing products on the Amazon India marketplace. The notice also disclosed the business arrangements between Amazon and Future Consumer Limited. CCI approved the transaction on November 28, 2019 under Section 31(1) of the Act.
On March 25, 2021, FCPL filed an application before CCI alleging that Amazon had taken a contradictory stand with respect to its investments in FCPL before arbitration proceedings and proceedings before constitutional courts. These established Amazon’s false representation and suppression of material facts before CCI. Based on this, CCI issued a show cause notice to Amazon and preliminarily found that Amazon: (i) failed to identify and notify the FRL Shareholders Agreement (‘FRL SHA’) as a part of the Transaction; (ii) concealed its strategic interest over FRL; and (iii) made false representations before CCI.
CCI considered the oral and written submissions made by Amazon, FCPL, and Confederation of All India Traders (‘CAIT’) (a trade body that was permitted to be part of the proceedings before CCI) to assess the matter based on two primary issues: (i) whether Amazon, the notifying party in Combination Registration No. C-2019/09/688, made misrepresentation, false statement or suppression or concealment of material facts in relation to the scope and purpose of the Transaction; and (ii) whether Amazon failed to identify and notify the FRL SHA as an inter-connected part of the Transaction.
CCI’s findings were as follows:
i. Relevance of internal correspondence: CCI considered that the internal correspondence of Amazon was relevant to determine the objectives to be achieved by way of the Transaction. Amazon’s internal correspondence disclosed that FRL Rights were an integral part of the Transaction. Documentation recorded that it was initially considering acquiring a 9.99% shareholding in FRL (in 2018) to build an ultra-fast delivery service, and later (in 2019) decided to use a twin-entity investment structure (considering developments in foreign investment laws) to invest in FRL. That is, Amazon would acquire 49% shareholding in FCPL which, in turn, would hold 8% – 10% of the shareholding in FRL.
ii. Relevance of objective of the Transaction: Amazon, as part of the notice of the Transaction, submitted that the rationale for entering into the Transaction was ‘to strengthen and augment the business of FCL (including the marketing and distribution of loyalty cards, corporate gift cards and reward cards to corporate customers) and unlock the value in the company’. However, based on the internal correspondence, CCI considered the actual purpose of the Transaction to be achieving a strategic alignment with Future group as a ‘foot-in-door’ in the Indian retail sector.
iii. Failure to submit complete information and disclosure of FRL SHA: Amazon submitted that all materials relevant to the Transaction, including a copy of FRL SHA, were submitted to CCI. Amazon further submitted that FCPL’s investment in FRL and FRL’s retail assets was a key consideration for it to pursue the Transaction. In fact, FRL’s value of assets and turnover was taken into account for the purpose of computing the thresholds under the Act. Amazon further submitted that the FRL SHA did not constitute a ‘combination’ as far as Amazon is concerned and that the relevant disclosure was made as part of the background documentation for the Transaction.
CCI rejected this submission and held that the purpose of the Transaction was a strategic alignment among the businesses of Amazon and Future group, particularly to expand the ultra-fast delivery service of Amazon, which was not adequately disclosed by Amazon. CCI also held that Amazon did not mention the FRL SHA or its commercial arrangements with Future in parts of the notification that request specific disclosures on interconnected transactions and milestones of the transaction. Amazon also failed to disclose that the FRL SHA was negotiated in the context of indirectly exercising rights in FRL. Based on this, CCI concluded that: (i) Amazon was in breach of its declaration to CCI that requires a confirmation that the information submitted was ‘true, correct, and complete’; and (ii) Amazon had committed a ‘breach of trust’.
Accordingly, CCI directed Amazon to submit a notification in a detailed application (form II) within 60 days and suspended its previous approval of the Transaction until it assesses the fresh filing. CCI also imposed a penalty of (i) Rs 2,00,00,000 under Sections 44 and 45 of the Act for submission of false information and suppressing information; and (ii) Rs 200,00,00,00 under Section 43A of the Act for Amazon’s failure to notify its strategic interest in FRL.
 Combination Registration No. C-2019/09/688.