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CCI

Amazon approval for $200 Mn Future Retail deal faces CCI hurdle

CCI

In a move that could potentially delay Amazon proposed stake acquisition in Future Retail, the Competition Commission of India (CCI) has sought more information regarding the deal from US-based e-commerce marketplace.

The antitrust body raised questions on the procedure adopted by Amazon.

In certain overlapping segments and areas of operation of the parties, the combined market share exceeds the threshold specified in the combination regulations, CCI said last month as Reuters report.

The CCI further asked Amazon for its justification on why it chose to file a Form I, instead of Form II.

A Form I filing typically takes two to three months, compared to three to six months for a Form II. This could lead to delay in approval, added the report.

Besides, the competition watchdog has asked Amazon over 40 questions related to the deal, adverse impact on the competition and its businesses.

In August, the Jeff Bezos-led firm had agreed to make an equity investment in Future Coupons Limited for acquiring a 49% stake comprising both, voting and non-voting shares.

To avoid any legal hassles, Amazon had sought pre-emptive approval from the antitrust watchdog CCI to acquire 49% stake in of Future Coupons Ltd(FCL).

Last December, the Indian government in its FDI draft policy market imposed some restrictions on the online marketplaces. It barred e-comm marketplace from holding an equity stake more than 25% in a vendor/seller. It is also restricted from controlling the vendor’s inventory.

Since Future Retail sells several of its branded product on Amazon’s online marketplace, the Amazon’s shareholding in FCL will be structured to ensure that the former takes up less than 25% equity shares with voting rights.

Besides, public listed Future Retail is not allowed directly to sell the stake to Amazon. Therefore it is routing it through its holding group’s FCL, which holds around 39.6 million share warrants. When converted, the share warrants will amount to approximately 7.5% stake in the Future Retail.

The deal will allow Amazon to leverage Future Group’s strong offline presence in the country.

Currently, Future Retails count of 1,557 stores and presence in 437 Indian cities. With stakes in three popular brick&mortar chains and food retail licence, Amazon has been busy in stitching missing pieces of modern retail (aka O2O).

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