Samara-Amazon acquisition of More under CCI probe after e-com FDI policy revision


In a recent turn of events in the Samara-Amazon acquisition of More store, the retail arm of Aditya Birla Group, Competition Commission of India (CCI) has sent queries to Samara Capital asking about the US-based e-commerce marketplace Amazon’s role in the deal.

The queries have come up keeping in perspective the revised Foreign Direct Investment (FDI) policy norms that the CCI is afraid Amazon can violate if the deal goes through.

The specifics of the deal entail that Amazon will be owning 49 per cent in the company, while Samara will own 51 per cent. The queries are related to how is Amazon going to work with the 49 per cent of More.

Whether or not Amazon will be involved in the day-to-day activities of More, how will it be represented on the board, and will More become an integrated part of the Amazon marketplace or not, are the few questions that concern CCI.

This is because of few provisions in the new policy. At the basic level, 50 per cent FDI is allowed in the multi-brand retail segment, and 100 per cent in the e-commerce marketplace segment as well as cash-and-carry wholesale vertical. Since Amazon owns 49 per cent, these clauses are nowhere being violated.

Nevertheless, there are 2 more clauses that called for CCI intervention.

One of the clauses says that any e-commerce marketplace entity cannot be in control of the inventory since that would make the business model of that entity inventory based. If Amazon is directly involved in More’s day to day operations, this clause shall be violated as Amazon will have a hold over the inventory kept in the More stores.

Secondly, if an entity is fully or partly owned by any e-commerce marketplace or its group companies, or if one of these group companies have control over its inventory, the entity cannot sell its product on the marketplace platform.

This essentially means that, as per these new provisions, if Amazon acquires More, it cannot control the inventory, participate in day-to-day operations, and it cannot sell the products sold in More stores online on its platform. More cannot be a part of the face of marketplace.

This creates a hurdle for the deal in its processes, as the original plan of Amazon was to bring More on its Amazon Prime Now marketplace as a seller, and hence it cannot create the omnichannel harmony between the two companies.

The only way for this deal to go forward now is for Amazon to only act as purely a financial investor in the acquired company when it already had maintained the distance from the board and management by taking the minority share.

The other option is for Amazon to withhold the integration until there was another policy revision that would allow Amazon to go forward with its initial plan. It will be interesting to see how Amazon responds to this development.

These facts were sourced from ET.

About Author

Send Suggestions or Tips