Amazon-Reliance fight may get nasty Mukesh Ambani and Jeff Bezos

The much-talked of battle between Amazon and Ambani, as it were, is getting intense with Reliance Retail brazening out that it would complete the deal with Future Group come what may, even though the Jeff Bezos’ company has blocked in a Singapore Court Reliance group’s bid to buy Future group’s assets.

It is said both Reliance and Future groups are likely to challenge the clause invoked by Amazon before the Singapore arbitration court to stall the acquisition of the Future group’s assets by Reliance Retail Ventures.

As of now, Amazon’s injunction will preclude Future Group from selling its assets to Reliance Retail by about 90 days.

Amazon had taken a 3.58% stake through a complex deal in Future Group’s Future Retail business last year. It moved the Singapore International Arbitration Centre prevent Reliance Retail’s take over of Future Retail Business.

Earlier in August, Reliance Retail acquired the retail and wholesale business and the logistics and warehousing business from the Kishore Biyani-promoted Future Group for Rs 24,713 crore.

What is Amazon protesting?

Amazon claims that its deal with Future Retail also included a non-compete clause. Amazon’s contention is that the non-compete clause restricted the Future Group and its promoters from forging any alliance with Reliance Retail and other such similar entities. 

Both Amazon and Future Group are also in an additional deal early this year that granted Amazon long-term rights to sell Future Group’s products online.

Amazon, it seems, has got what it wanted from the Singapore court. Immediately after the verdict, Amazon said the company was grateful for the order which grants all the reliefs that were sought. “We remain committed to an expeditious conclusion of the arbitration process.”

Reliance Retail’s response

Reliance Retail, which has got a clutch of investments from big-ticket investors, is not the one to take such blows lying down. As a company it is not known to take a defensive step back.

Right off the bat, it has gone on the offensive. In a tersely worded statement to the media, it said: “Reliance Retail Ventures Limited (RRVL) is informed of an interim order passed by the  Emergency Arbitrator in the arbitration proceedings invoked by Amazon under a  shareholders’ agreement with the promoters of Future group.”

“RRVL has entered into the transaction for acquisition of assets and business of Future Retail  Limited under proper legal advice and the rights and obligations are fully enforceable under Indian Law.” 

“RRVL intends to enforce its rights and complete the transaction in terms of the scheme and  agreement with Future group without any delay.”

The implicit suggestion is the interim order handed out by the Singapore International Arbitration Centre is not binding. Reliance is falling back on the “rights and obligations” under Indian law. 

As a ploy, it is interesting, but not surprising.

Future Group’s stand

The Future Group, which clearly needs the money to prevent liquidation of its assets, is now caught on the wrong foot. It, however, said it is not a party to the agreement under which Amazon has invoked arbitration proceedings.

But significantly, it also followed the line taken by Reliance Retail. In a filing with the stock exchange, it said: “FRL has been legally advised that actions taken by the FRL / its board, which are in full compliance of the relevant agreements and eminently in the interest of all stakeholders cannot be held back in arbitration proceedings initiated under an agreement to which FRL is not a party. As per the advice received by FRL, all relevant agreements are governed by Indian Law and provisions of Indian Arbitration Act for all intents and purposes and this matter raises several fundamental jurisdictional issues which go to the root of the matter. Accordingly, this order will have to be tested under the provisions of Indian Arbitration Act in an appropriate forum.”

Where the fight is headed?

It is too early to predict who the ultimate winner will be in this no-holds-barred contest. But the vehemence with which Amazon is pulling out all stops in this case  makes it clear that the Reliance Group, which has a lot of things growing for it in Indian context, should be ready for the long haul.   

India’s estimated $1 trillion retail market is too big a cake for both to lose without a fight. Amazon needs the Indian partner to strengthen its foothold after becoming the authorised online sales channel for Future Retail’s stores that sell everything from groceries to cosmetics and apparel.

Future Retail operates some of India’s most popular retail chains and is in more than 400 cities in every state of the country through digital platforms and over 1500 stores that cover over 16 million square feet of retail space.

It has large format stores, Big Bazaar, its flagship chain, besides small store neighbourhood retail chains, EasyDay Club and Heritage Fresh.

Reliance Retail, which has launched Jio Mart, also needs Future’s retail infrastructure to grow strong roots.

Reliance Retail is planning to build on its brick and mortar set up (It has over 12000 shops) and its connection with local kiran shops to scale up Jio Mart’s operations.

Amazon, for its part, owns 49% in More, a popular brick and mortar supermarket chain. Samara Capital holds the rest of the equity in More. Both made an investment of $450 million in 2018 and followed up with an additional $37 million last month.

And then there is the third angle to the fight, the Walmart-owned Flipkart, which is also making impressive strides.

Any fight between Amazon and Reliance will benefit Flipkart for obvious reasons.

Watch this space for more in the days ahead.

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