Reliance deal

Amazon has made a few arguments and asked India’s market regulators to look into the Future Retail deal with Reliance Industries. The company has accused Future Retail of insider trading, a letter confirmed by Reuters as it seeks to stop its business partner from becoming a part of the rival’s dynasty. In response to this accusation, Future Group has asked the court for a restraining order so that Amazon cannot approach the regulators which might put the deal with Reliance in jeopardy.

Amazon has been putting pressure on the Securities and Exchange Board of India (SEBI) to review the deal of Reliance that took place in August. The August deal between Reliance and the Future Group announced the acquisition of the retail, wholesale, logistics, and warehousing business of the latter for Rs 24,713 crore via Reliance Retail Ventures.

Why Amazon is making accusations?

Amazon has made it clear that it had an agreement with the Future Group in 2019 that prevented the Indian group’s retail assets from selling to some specific parties. Reliance is one of those parties that Future Group is barred from selling the assets. Amazon now accuses the Future Group that it has disclosed price-sensitive details of an injunction granted by a Singapore arbitrator to Reliance in order to block its deal with the same. In response to these allegations, the Future Group has included in its statement that Amazon needs a “tutorial on the law on insider trading”.

The deal along with accusations and the judgment will be an example of how the Indian firms and the judiciary system values the arbitration decision made following overseas arbitration rules. This may come as another backlash for Amazon which will degrade its reputation more as it is already facing antitrust challenges.

The injunction Amazon speaks of was granted on 25th October while the company welcomed the decision. On the same day, Reliance informed that it has informed of the arbitration order and the company will enforce its rights to complete the deal with Future Group as early as possible. But, now Amazon in its 20-page letter to the SEBI accused that Reliance was secretive about the price details of the injunction.

What if the Reliance deal fails?

Amidst the accusations that Amazon has made to scupper the deal, Future Retail will go into liquidation if the deal with Reliance Industries is not successful. The 130-page order by the arbitrator shows the level of concern in the Future Retail of this deal breaks. More than 1,500 outlets of Future Retail will have to pack up creating havoc for thousands of employees and the workers in the vendor firms. Future Retail has taken the decision to go for liquidation which means the earning of more than 29,000 employees will stop at once.

Future Retail said that after the pandemic has struck the world, the retail sector has been hit hard. And, this deal with Reliance was supposed to protect the interest of the stakeholders by the acquisition of the liabilities and huge funding. Amazon, after filing accusations has made its relationship sore with both Future Retail and Mukesh Ambani’s Reliance.

Future Group defends itself

While Amazon is putting allegations on the Future Retail and Reliance, a spokesperson for Future has made a statement to Reuters that Amazon has made wrongful allegations. The news of the injunction was made public on Sunday. Neither Reliance nor SEBI has made any comments to Reuters after this and Amazon has also declined to comment regarding the content of the letter.

Future Retail has further told that the agreement Amazon is talking about regarding preventing from selling the assets to Reliance was with a separate Future Group unit. It has also mentioned that on 26th October Future Retail said that they were examining the arbitration order and the same should be tested by Indian law.

Now, we can do nothing but wait and observe the decision of the Indian court. It is important for the regulators as well to choose the right side between Amazon and Future Retail. Amidst the COVID-19 crisis, losing a job for thousands of employees will make the economy worse.