CCI clears Reliance-Future retail deal despite Amazon's objections

The Competition Commission of India (CCI) approved the acquisition by Reliance of the online and offline businesses for the Future Group on Friday

“Commission approves acquisition of retail, wholesale, logistics & warehousing businesses of Future Group by Reliance Retail Ventures Limited and Reliance Retail and Fashion Lifestyle Limited,” the CCI said via a Twitter update.

To add to its expanding retail business, Mukesh Ambani-owned Reliance Industries (RIL) had acquired the retail businesses of Kishore Biyani’s Future Group in August in a complex deal involved folding five listed entities, including Future Retail into Future Enterprises (FEL), which houses the group’s retail back-end infrastructure.

The retail business would then be transferred to Reliance in a slump sale for nearly Rs 24,713 crore, thus obviating the need for a stake sale.

This deal requires approvals from the CCI, Securities and Exchange Board of India (Sebi) and National Company Law Tribunal (NCLT) in addition to no objection certificates from creditors and minority shareholders.


The competition regulator’s approval comes after about two months of assessment as Reliance had sought the CCI’s nod for the deal on September 23.

“Based on the retail assessment framework, the commission's finding is that the deal does not have an appreciable adverse effect on competition,” said a person aware of the matter, adding that the assessment took two months as the CCI had asked the parties for clarifications during the process.

While the deal has taken on significance due to the ongoing bitter legal dispute between Amazon and the Future Group, the deal was significant from a competition perspective as well, considering the backward and forward linkages and the online and offline nature of the combination.

In October, Amazon sent a legal notice to Future Group last month and also approached the Singapore International Arbitration Centre (SIAC) for breach of contract.

Amazon bought 49% in promoter holding firm Future Coupons for Rs 1,500 crore last year to indirectly own a 5% stake in Future Retail — which houses a raft of food and grocery store brands such as Big Bazaar, HyperCity, Easyday and Nilgiri's.

As per Amazon’s interpretation of their contract, Future cannot sell any shares of FRL to Reliance or any other competitor, besides the American company having the right of first refusal.

SIAC in its interim order has ruled that Future Group’s proposed retail sell-out plans to Reliance should be put on hold until it gives the final order and also restrained Future Group from transferring or pledging any shares of Future Retail without Amazon's permission.

The arbitration court ruled that while Amazon was aware of Future Retail's discussions with Reliance, it had no details on the contours, nature and specifics of the potential deal. It also said the disputed transaction is with Reliance, a competitor that Amazon had expressly singled out as a restricted person and the parties unequivocally agreed to this investment parameter.

The latest development comes as a major setback for Amazon, as it had asked the CCI along with market regulator, the Securities and Exchange Board of India (Sebi) to consider the SIAC’s order and block the deal.

In addition, Amazon has also asked Sebi to investigate Future Retail Ltd for insider trading and breaching confidentiality.

In a counter offensive move, Future Group also dragged the US e-tailer in Delhi High Court for interfering with the deal process and argued that the SIAC order was not binding and enforceable in India.

Even Reliance Retail said it intends to enforce its rights and complete the transaction in terms of the scheme and agreement with Future Group without any delay.