Meaning of Amazon-Future deal suspended: What is the reason for the suspension of the deal, how much loss to Amazon and how much benefit to Reliance?

The Competition Commission of India (CCI) has imposed a fine of Rs 200 crore on Amazon. Also, after 2 years, the deal of Amazon and Future Group has been suspended. During the regulatory approval, the matter of hiding information on Amazon came to the fore. For this reason hefty fines were imposed on the company. In the year 2019, Amazon bought 49% stake in Future Coupons for Rs 1,500 crore. The CCI suspended it on Friday.

What was the reason for suspending this deal? Why was Amazon fined? How much will it hurt Amazon? What will be the benefit to Reliance by suspending this deal? And what will be the impact of the suspension of this deal on the users? Know the answers to all these questions in this news.

First of all, know what was the reason for suspending the deal?
Future Coupons Pvt Ltd (FPCL) and Confederation of All India Traders (CAIT) had alleged that Amazon’s 49% stake in FPCL was aimed at indirectly controlling Future Retail Ltd. Keeping these allegations in mind, the Commission of India (CCI) suspended the deal. However, CCI has also asked for a fresh look at the deal.

Why was Amazon fined 200 crores?
The Competition Commission of India (CCI) has suspended the deal in a 57-page order. The CCI said that Amazon hid its real motive for the deal. While seeking permission for this deal, Amazon underreported the actual scope of the deal. Also made false and false statements about the agreement. A fine of Rs 200 crore was also imposed on Amazon for hiding important information to get permission.

What could be wrong with Amazon?
Future Retail’s revenue stood at Rs 6,304 crore in the financial year 2020-21. However, it declined by 69% as compared to a year ago. Future Retail operates stores such as Big Bazaar, Hypercity, Easy Day Club and Heritage Fresh. Amazon wanted to get a 49% stake in the loss-making company. This would have made Amazon a big profit in the future. Currently, Amazon has been fined Rs 200 crore by the Commission of India (CCI). That is, there is bound to be a loss of 200 crores for the company.

In October, Reliance Retail said it had become the second largest customer of the Future Group. Future Consumer contributes a quarter of its total sales. In 2020-21, the retail arm of Reliance Industries bought goods worth Rs 157.54 crore from Future Consumer. In the annual report, Reliance Retail had said that Future Consumer contributed 26.8% to its total purchases. The total purchase was Rs 586.15 crore.

What will happen next in this deal for Amazon?
The Competition Commission of India (CCI) was reviewing Amazon’s $200 million (about Rs 1,500 crore) investment in Future Group in 2019. He has suspended the deal and asked to look at it afresh. After the CCI order, Amazon can file its reply within 60 days. Till then this deal of 2019 will remain on hold.

What will be the benefit to Reliance by suspending this deal?
It is believed that this legal dispute between Amazon and Future Group is actually related to the deal of Rs 24,713 crore between Reliance and Future Group in August last year. Under the Reliance-Future deal, Reliance Group is going to get the entire stake of Future Group’s retail and logistics companies. With the suspension of the Amazon-Future deal, the prospects of Reliance Retail’s approval of the deal with Future Retail have increased. If Reliance’s deal is approved in the coming times, it will give Reliance Future Group’s retail, warehousing and logistics business.

The deadline for completing the Rs 24,713 crore deal with Reliance-Future Group has been extended for the second time. Now the deal will be completed by March 31, 2022. Reliance is awaiting regulatory and court approval for the deal. Both Reliance Retail and Fashion Lifestyle Limited, a wholly owned subsidiary of Reliance Retail Ventures Limited, have approved the same.

By the way, Amazon has moved the Singapore International Arbitration Center (SIAC) objecting to the Reliance-Future retail deal. Amazon says that the deal between Reliance and Future Retail is against the deal between it and Future Coupons. After this the matter is going on from High Court to Supreme Court and National Company Law Tribunal (NCLT).