Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): Coram of Ashok Kumar Gupta (Chairperson) and Sangeeta Verma and Bhagwant Singh Bishnoi (Members) in view of a deliberate design on the part of Amazon to suppress the actual scope and purpose of the Combination, levied the maximum penalty of INR One Crore each under the provisions of Sections 44 and 45 of the Competition Act. Due to failure to notify combination under Section 6(2) of the Act, Section 43A of the Act, a penalty was imposed.

Purpose of this Order

The present order shall govern the disposal of the proceedings initiated against the Amazon.com NV Investment Holdings LLC (Amazon) under Sections 43A, 44 and 45 of the Competition Act, 2002 in relation to its acquisition of 49% shareholding in Future Coupons Private Limited (FCPL) in pursuance of the show cause notice based on application dated 25-3-2021 of FCPL.

CCI had approved the Combination under Section 31(1) of the Act upon competition assessment of the overlapping business activities of Amazon, FCPL and their group entities and after arriving at the opinion that the Combination is not likely to cause any appreciable adverse effect on competition in India.

 Initiation of proceedings under Sections 43A, 44 and 45 of the Act

 FCPL filed an application stating that Amazon had initiated arbitration proceedings in relation to transfer of assets of FRL, a company in which FCPL holds 9.82% of the shareholding and there are related litigations pending before the constitutional courts.

It was alleged that Amazon took completely contradictory stands in the arbitration proceedings and constitutional courts with respect to its investments in FCPL as compared to the representation and submissions made before the Commission. Such contradictions were said to establish false representation and suppression of material facts before the Commission.

Commission was of prima facie view that

(a) Amazon failed to identify and notify FRL SHA as a part of the Combination, in terms of Regulation 9(4) and Regulation 9(5) of the Combination Regulations;

(b) Amazon had concealed its strategic interest over FRL; and

(c) Amazon had made false and incorrect representations and concealed/suppressed material facts in contravention of the provisions of the Act.

In view of the above, Commission issued SCN under Sections 43A, 44 and 45 of the Act to Amazon, on 4th June, 2021.

Commission received a letter on 20-10-2021 from Amazon inter alia intimating that it has shared with Future Group, the Response to SCN and related correspondence with the Commission.

Later, Commission decided to hear both FCPL and Amazon on 4-1-2022.

Question for Consideration:

Whether alleged conduct (s) of Amazon is in contravention of the provisions of Sections 43A, 44 and 45 of the Act?

Whether Amazon has made misrepresentation, false statement or suppression/concealment of material facts in relation to the scope and purpose of the Combination and failed to identify and notify FRL SHA as an inter-connected part of the Combination, in terms of Regulations 9(4) and 9(5) of the Combination Regulations?

Analysis and Discussion

Commission noted the contract summary and internal e-mail dated 19th July, 2019 of Amazon Group with the subject ‘Request for APPROVAL for Project Taj [Future]…’, which elaborated the business summary and summary of key terms of the Combination (Approval Request). This e-mail was sent by Mr Rakesh Bakshi to Mr Jeff Bezos, seeking approval to sign definitive documents in relation to the Combination.

As per the internal communications and negotiations between the parties relating to the Combination, wherein Amazon initially planned to partner with Future Group, being a key player in the offline retail market, by acquiring 9.99% shareholding in FRL as well as entering into a business commercial framework to build and accelerate ultra-fast delivery services across the top-20 cities in India, leveraging the national footprints of Future Group.

The Approval Request dated 18th July, 2019 suggests that, in view of certain developments relating to foreign investments in India, instead of directly acquiring 9.9% shareholding in FRL, Amazon would use a twin-entity investment structure to invest in FRL i.e., Amazon would acquire 49% shareholding in FCPL which, in turn would hold 8 – 10% of the shareholding in FRL.

Coming to the Notice, it required the notifying party to disclose ‘Economic and Strategic purpose (including business objective and rationale for each of the parties to the combination and the manner in which they are intended to be achieved) of the Combination’.

Further, the Internal Correspondence of Amazon made it abundantly clear that Amazon was all along focussed/interested in FRL. The Internal Correspondence of Amazon did not speak about the business potential of FCPL, as had been claimed and projected in the Notice and in the responses to the letters of the Commission. Similarly, the Notice presented the rationale of indirect rights over FRL, as protection to investment in FCPL.

The expressions used by Amazon to describe the rationale behind the indirect rights over FRL varied from time to time: ‘strategic rights’ in its Internal Correspondence; ‘protection to investment in FCPL’ in the Notice given to Commission; and ‘rights derived from FRL SHA are to protect the interest of the investor [Amazon]’ in the response to SCN.

Commission observed that, in every case of investment, the acquirer would want to protect the value of its investment and the returns.

The purpose of securing strategic interest over FRL and commercial partnership with FRL is much different from FRL, a company with strong financials and futuristic outlook, being merely taken as an element of financial strength and protection to the investment in FCPL.

How has the Suppression of fact continued?

The Internal Correspondence of Amazon clearly showed different purposes for envisaging the Combination (i.e., ‘foot-in-door’ in the Indian retail sector, secure rights over FRL that are considered as strategic by Amazon and Commercial Arrangements between the retail business of Future Group and Amazon).

Amazon in its responses to the letters of the Commission, continued to suppress the actual purpose of the Combination. It was obvious that the purpose of Amazon to pursue the Combination was not the potential of the gist and loyalty card business of FCPL, as had been claimed in the Notice. Rather, FCPL was envisaged only as a vehicle in the Combination to which no value or purpose is ascribed in the Internal Correspondence.

In Commission’s opinion the present matter was a clear, conscious and wilful case of omission to state the actual purpose of the Combination despite the disclosure requirement under Item 5.3 of Form I read with Regulation 5 of the Combination Regulations and Section 6(2) of the Act.

Amazon failed to provide any material or plausible explanation in its response to the SCN and in the subsequent submissions to demonstrate that its disclosures against Item 5.3 are correct and that business potential of FCPL was consideration for Amazon to pursue the Combination.

Adding to the above, Coram also stated that Amazon, in addition to the omission to state the purpose of the Combination, has misrepresented the Commission by stating that the purpose of the Combination is an opportunity arising from the business potential of FCPL and to add credibility to FCPL’s financial position, FCPL invested and proposed to further invest in FRL, a company with strong financials and futuristic outlook.

Amazon had misled the Commission to believe, through false statements and material omissions, that the Combination and its purpose were the interest of Amazon in the business of FCPL.

Further, the Coram added in respect to disclosure against Item 8.8 of Form I that,  True and complete disclosure against Item 8.8 enables the Commission to determine the appropriate framework for competition assessment of the Combination.

In response to Item 8.8, Amazon had furnished a presentation titled ‘Taj Coupons – Business Plan for 5 years’. The eight- page presentation provides only a brief idea of the gift voucher business of FCPL, its business operating model, estimated five-year business size, organisation design, sales team and financial summary, without any reference to FRL.

Commission in view of the above stated that Amazon knowingly suppressed relevant and material documents to be furnished under Item 8.8. of Form I.

Hence, Commission held that the conduct of Amazon amounted to suppression and misrepresentation of the purpose of the Combination and the said was in contravention of the provisions contained n clauses (a) and (b) of Section 44 and clause (a) and sub-section (1) of Section 45 of the Act.

The conduct of Amazon in supressing relevant and material documents against the disclosure requirement under Item 8.8 of Form I is a contravention of clause (c) of sub-section (1) of Section 45 of the Act. Similarly, the rights over FRL that were considered as strategic in the Internal Correspondence of Amazon, were represented as mere investor protection rights. Such repeated assertions, contrary to their actual purport, amount to statements that are false in material particular, in contravention of the provisions contained in clauses (a) and (b) of Section 44 and clause (a) of sub-section (1) of Section 45 of the Act.

Whether FRL SHA was identified and notified as an inter-connected part of the Combination?

In the present matter, Combination was a composite of acquisition of shares, rights and commercial contracts. These together were for the purpose of strategic alignment amongst the business of the parties, in particular to expand the ultra-fast delivery service of Amazon.

The fact that FRL SHA was part of the Combination and was executed at the behest of Amazon, was overwhelmingly evident from the email dated 4-1-2019 of Amazon to Future Group. Commission observes that mere consideration of the values of the asset and turnover of FRL cannot be considered as notification of FRL SHA and BCAs, as parts of the Combination.

Coram stated that details of FRL SHA were not mentioned in Item 5.2. As has emerged now, FRL SHA and the commercial agreements were inter-connected parts of the Combination and accordingly, their details ought to have been disclosed against Item 5.1.2.

The Notice, nowhere disclosed the fact that FRL SHA was negotiated as part of the Combination and was executed for the purpose of Amazon acquiring rights over FRL, through FCPL SHA, and that Amazon had insisted for FRL SHA to be entered into as a prerequisite to Transaction III. In the absence this material fact being disclosed, footnote 3, read with the disclosures and statements in the Notice and subsequent submissions of Amazon, including those against Items 5.1.2 and 5.2 of Form I, statements made in paragraphs 34 of the Notice and paragraph 44 of the submission dated 15th November, 2019 (in response to the letter dated 9th October, 2019 of the Commission), the impugned statement was self-evidently misleading to the effect that FRL SHA was not a part of the Combination and is only pursuant to the Warrants Transaction.

CCI held that, the categorical statements that FRL SHA and BCAs were independent of the Combination sufficiently establish that the same were not notified to the Commission as a part of the Combination, which is a contravention of the obligation contained in Section 6(2) of the Act, which attracts penalty under Section 43A of the Act.

Coram noted that Section 6(2) of the Act requires any person proposing Combination ‘to give notice to the Commission in the form as may be specified…disclosing the details of the proposed combination’.

If a party conceals/suppresses and/or misrepresents to the Commission the scope and purpose of the Combination and obtains approval, the same would effectively amount to approval/consent having been obtained by way of fraud.

Therefore,

Amazon ought to have notified the combination, inter alia, consisting of the following inter-connected steps: (a) Transaction I; (b) Transaction II; (c) Transaction III; (d) FRL SHA for the purpose of acquisition of strategic rights over FRL through FCPL SHA; and (e) commercial agreements between Amazon and Future groups, for the purpose of establishing strategic alignment and partnership between Amazon Group and FRL as well as have a ‘foot-in-the-door’ in the India retail sector.

The Commission directed Amazon to give notice in Form II within a period of 60 days from the receipt of this order and till disposal of such notice, the approval granted vide Order dated 28-11-2019, in Combination, shall remain in abeyance.

Penalty

The Commission considers it appropriate to levy the maximum penalty of INR One Crore each under the provisions of Section 44 and Section 45 of Act. Accordingly, Amazon is directed to pay a penalty of INR Two Crore.

Due to failure to notify combination in terms of the obligation cast under Section 6(2) of the Act, Section 43A of the Act enables the Commission to impose a penalty, which may extend to one percent of the total turnover or the assets, whichever is higher, of such a combination. Accordingly, for the above-mentioned reasons, the Commission hereby imposes a penalty of INR Two Hundred Crore upon Amazon.[ Proceedings against Amazon.com NV Investment Holdings LLC under Sections 43A, 44 and 45 of the Competition Act, 2002, In Re., 2021 SCC OnLine CCI 71, decided on 17-12-2021]


Advocates before the Commission:

For Amazon: Mr. Gopal Subramanium and Mr. Amit Sibal, Senior Advocates with Mr. Anand S. Pathak, Ms. Sreemoyee Deb, Ms. Anubhuti Mishra and Mr. Rajat Moudgil, Advocates alongwith Mr. Rakesh Bakshi, Mr. Ankur Sharma, Ms. Ujwala Uppaluri and Ms. Hina Doon, representatives of Amazon

For FCPL: Mr. Harish Salve and Mr. Ramji Srinivasan, Senior Advocates with Mr. Raghav Shankar and Mr. Pranjit Bhattacharya, Advocates alongwith Mr. Sanjay Rathi, representative of FCPL

For CAIT: Mr. Krishnan Venugopal and Mr. Saurabh Kirpal, Senior Advocates with Mr. Rajat Sehgal and Mr. Debayan Gangopadhyay, Advocates

Hot Off The PressNews

The Competition Commission of India (CCI) approves the acquisition of stake by Axis Bank Limited, Axis Capital Limited and Axis Securities Limited in Max Life Insurance Company Limited.

Axis Bank Limited provides services in retail banking, which includes retail lending and retail deposits, wholesale banking, payment solutions, wealth management, forex and remittance products, distribution of mutual fund schemes and distribution of insurance policies.

Axis Capital Limited is engaged in the business of providing focused and customized solutions in the areas of investment banking and institutional equities.

Axis Securities Limited is engaged in the business of broking, distribution of financial products and advisory services.

Max Life Insurance Company Limited is Life Insurance company registered with Insurance Regulatory and Development Authority of India (IRDAI). It is engaged in the business of providing life insurance and annuity products and investment plans in India.

The proposed combination approved by CCI relates to increase of shareholding in Max Life Insurance Company Limited (Target) to approximately 9.9% by Axis Bank Limited and acquisition of 2% and 1% shareholding in the Target by Axis Capital Limited and Axis Securities Limited respectively.

Detailed order of the CCI will follow.


Ministry of Corporate Affairs

[Press Release dt. 21-01-2021]

[Source: PIB]

Legislation UpdatesNotifications

In exercise of the powers conferred by clause (a) of section 54 of the Competition Act, 2002 (12 of 2003), the Central Government hereby exempts a Banking Company in respect of which the Central Government has issued a notification under Section 45 of the Banking Regulation Act, 1949 (10 of 49), from the application of the provisions of Sections 5 and 6 of the Competition Act, 2002, in public interest for a period of five years from the date of publication of this notification in the Official Gazette.

Note:

Section 5 of Competition Act, 2002 talks about “Combination”.

Section 6 of Competition Act talks about “Regulation of Combinations”.


Ministry of Corporate Affairs

[Notification dt. 11-03-2020]

Business NewsNews

The Competition Commission of India (CCI) approves the proposed combination between Yum Restaurants (India) Private Limited (YRIPL) and Devyani International Limited (DIL) involving acquisition of certain  equity shareholding and sale of certain KFC restaurants.

YRIPL is a private limited company incorporated in India and is a part of Yum! Brands Inc,-a USA based entity. It is stated that in India YRIPL runs restaurants under three Brands i.e. KFC, Pizza Hut and Taco Bell.

DIL is a public company incorporated in India. It is stated to be present in QSR segment in India and is one of the franchisees of YRIPL. Further, as a franchisee, it runs, maintains and operates KFC and Pizza Hut/Pizza Hut Delivery restaurants in certain territories of India.

The CCI approved the proposed combination under Section 31(1) of the Act.


Ministry of Corporate Affairs

[Press Release dt. 03-02-2020]

[Source: PIB]

Business NewsNews

The Competition Commission of India (CCI) approves acquisition of shares in My Home Industries Private Limited by My Home Constructions Private Limited and its affiliates.

The proposed combination envisages acquisition of 50% of the shareholding of My Home Industries Private Limited (My Home Industries) by My Home Constructions Private Limited (MHCPL), Jupally Real Estate Developers Private Limited (JREDPL) and Dr Rameswar Rao Jupally.

MHCPL and JREDPL are part of My Home Group based out of Hyderabad, Telangana.  Dr Rameswar Rao Jupally is the promoter of My Home Group, which has interests in construction and real estate development, manufacturing and supply of grey cement, power consultancy, power generation, power trading, transportation and logistics, media and broadcasting, pharmaceutical and education.

My Home Industries is a 50:50 joint venture between CRH India Investments B.V. and the Acquirers. It is engaged in the manufacturing and supply of grey cement under the brand name “Maha Cement” in India. It is present in the states of Andhra Pradesh, Tamil Nadu, Union Territory of Puducherry, Telangana, Kerala, Karnataka, Odisha, West Bengal, Bihar, Maharashtra, Jharkhand and Chhattisgarh. It is also engaged in power generation activities from waste heat and solar power sources for the purposes of captive consumption.


Ministry of Corporate Affairs

[Source: PIB]

[Press Release dt. 27-12-2019]

Business NewsNews

The Competition Commission of India (CCI) approves the acquisition of stake in Future Supply Chain Solutions Limited (Future Supply) by Nippon Express (South Asia & Oceania) Pte. Ltd. (Nippon Express), under Section 31(1) of the Competition Act, 2002.

The proposed combination pertains to the acquisition by Nippon Express of approximately 22% of the total issued and paid-up share capital of Future Supply, on a fully diluted basis.

Nippon Express is a Singapore-based wholly-owned subsidiary of Nippon Express Co. Ltd., with operations over the South Asian and Oceania regions. It is a Japan-based global logistics company, which provides one-stop logistics services, which include, transport services, global supply chain management, warehouse and distribution services, etc.

Future Supply is a third-party supply chain and logistics service provider in India which offers automated and IT-enabled warehousing, distribution and other logistics solutions. These services include, (a) contract logistics; (b) express logistics; and (c) temperature-controlled logistics. The Target, inter alia, offers warehousing and distribution services and automated technology systems to cater to its customers’ supply chain needs. Additionally, it also provides international freight forwarding services by water routes and air routes.


Ministry of Corporate Affairs

[Press Release dt. 10-12-2019]

[Source: PIB]

Business NewsNews

The Competition Commission of India (CCI) approves the acquisition of shareholdings in Mumbai International Airport Limited (“MIAL”) by Adani Properties Private Limited (“APPL”)from Bid Services Division (Mauritius) Limited (“BSDA”) and ACSA Global Limited (“ACSA”), under Section 31(1) of the Competition Act, 2002 (“Act”).

The proposed combination relates to acquisition of 23.5 percent equity stake of MIAL by APPL from BSDA and ACSA. APPL proposes to acquire 13.5 percent equity shares of MIAL from BSDA and 10 percent equity shares of MIAL from ACSA.

The acquirer i.e. APPL is a member of the Adani Group which is a diversified infrastructure conglomerate. APPL is engaged in let-out and/or leasing of immovable properties and wholesale trading of commodities. APPL has various subsidiaries, associates and joint venture companies/ entities, which are into real estate business, financial services, generation of power using renewable sources of energy and LPG terminal setup.

The target i.e. MIAL, a public company registered at Mumbai, is engaged in operating, maintaining, developing, designing, constructing, upgrading, modernising, financing and managing the Chhatrapati Shivaji International Airport (“CSIA”) at Mumbai. Its services include activities incidental to air transportation such as operation of terminal, airway facilities, etc.

The Commission approved the proposed combination under Section 31(1) of the Act.


[Source: PIB]

[Press Release dt. 14-11-2019]

Business NewsNews

CCI approves acquisition of 4.15% of the shareholding in Aditya Birla Capital Limited by Jomei Investments Ltd. of Combination under Section 31(1) of the Competition Act, 2002

The Competition Commission of India (CCI) approved acquisition of 4.15% of the shareholding in Aditya Birla Capital Limited (ABCL) by Jomei Investments Limited (JIL).

JIL, a special purpose vehicle, is wholly-owned by Advent International GPE IX Limited Partnership, a fund managed by Advent International Corporation.

ABCL is the holding company for the financial services businesses of the Aditya Birla group. Through its subsidiaries and joint ventures, ABCL has presence across diverse businesses including, non-banking financial sector, asset management, life insurance, housing finance, health insurance, general insurance broking, wealth management, equity, currency and commodity broking, pension fund management and asset reconstruction businesses.


Ministry of Corporate Affairs

[Press Release dt. 24-10-2019]

[Source: PIB]

Business NewsNews

CCI approves the acquisition of a shareholding in GMR Airports Limited (“GAL”) by TRIL Urban Transport Private Limited (“TUTPL”), Valkyrie Investment Pte. Ltd. (“Valkyrie”) and Solis Capital (Singapore) Pte. Limited (“Solis”) under Section 31(1) of the Competition Act, 2002.

The proposed combination relates to the acquisition of up to 55.2% equity stake in GAL collectively by TUTPL, Valkyrie and Solis.

TUTPL is a wholly-owned subsidiary of Tata Realty and Infrastructure Limited (“TRIL”), which in-turn is a wholly-owned subsidiary of Tata Sons Private Limited (“Tata Sons”). TUTPL is engaged in the development of urban transport and infrastructure facilities such as ropeways, metro rail transit system etc.

Valkyrie is a foreign venture capital investor (“FVCI”) registered with the Securities and Exchange Board of India (“SEBI”) under the SEBI (Foreign Venture Capital Investors) Regulations, 2000 (“SEBI FVCI Regulations”). Valkyrie is a special purpose vehicle
organized as a private limited company in Singapore and is an affiliate of GIC Private Limited.

Solis is registered as an FVCI with SEBI under the SEBI FVCI Regulations. Solis is an investment vehicle of the SSG group and is advised by SSG Capital Management (Singapore) Pte. Ltd., which is regulated by the Monetary Authority of Singapore to undertake fund management activities.

GAL is registered with the RBI as a CIC-ND-SI and is an investment holding company. GAL, through its subsidiaries, is engaged in developing, managing and operating airports in India and around the world, while also being engaged in associated business activities.

The Commission approved the Proposed Combination subject to carryout of certain modifications proposed by TUTPL under Regulation 19 (2) of the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011.


Competition Commission of India

[Press Release dt. 01-10-2019]