India’s economy loses at Amazon-Ambani regulatory slugfest for the future

This is the second time that a division bench of the Delhi High Court has overturned a single bench order allowing arbitration to proceed. On a previous occasion, an Amazon appeal to the Supreme Court had resumed arbitration.

It’s important not to recall Wood for Trees in an ongoing case in which Future Group wants to pull out of a deal it made with Amazon to seek its approval to sell to a third party, Future Retail. Future Retail wants to sell the operation to Reliance Retail Ventures.

The future is using the courts and the Competition Commission of India (CCI) to get its way. The union-family-leaning Confederation of All India Traders (CAIT) has also been mobilized to lobby against Amazon, and CAIT petitioned the CCI to thwart Amazon’s attempt to stall the deal.

In 2019, the competition regulator had approved Amazon to buy a 49% stake in Future Coupons Ltd, a holding company for Future Retail. Now the commission has given a second thought to its approval. It appears that if Amazon controls Future, which operates Big Bazaar, there will be a competition violation, but if Reliance were to buy Future, the competition would not be as bad.

Can Amazon control the future at all, given the restrictions on FDI in multi-brand retail? If it can’t, why should it play dog-in-the-manor compared to Reliance Retail? True, Amazon may not own Future directly, but nothing prevents ownership from being structured in such a way that the majority stake in Future is held by several companies in which Amazon has a large minority stake and the majority stake outright. from Indian entities that are happy to serve as passive investors that allow Amazon to take control.

The good of the public at large lies in the efficiency of the retail industry and the Indian economy attracting large amounts of foreign and domestic investment, rather than trampling one corporate group into another. Corporate rivalry is good if it leads to competition that lowers prices for end consumers, but bad if it affects the institutional integrity and credibility of a country in the eyes of global investors.

Specific provisions of the agreement between Amazon and the Future case for the courts and arbitrators. But from the point of view of the attractiveness of the Indian economy as a business destination, what matters is the bigger picture. The big picture is that the Indian government has placed regulatory restrictions on foreign big retail, while allowing domestic big retail to do what it wants.

That is at the policy level. Then, there is the functioning of India’s institutions, courts and regulators like the CCI. The conduct of the commission and the courts tells foreign observers of the Indian economy that Indian entities can be used to obstruct foreign companies in India, regardless of their actual level of compliance with policy and law.

Big Retail’s market share is barely 15% of the total retail business, even though it can grow rapidly. Therefore, the rise of Big Retail, whether foreign-owned or domestic, cannot hurt the consumer. Instead, it can only benefit the consumer, with economies of scale and innovations in logistics that eliminate layers of intermediation and cost.

Therefore, the use of courts and regulators like CCI in disputes between foreign and domestic Big Retail is not about consumer interest, but corporate interests. This does not add to India’s reputation as a market economy, where foreign companies are treated at par with domestic companies, once entry conditions are met, if domestic institutions are used to deter foreign companies. when it conflicts with the interests of domestic companies. For things to look fair, globally respected international arbitrations, such as those by the Singapore International Arbitration Centre, should be seen to work, rather than throwing legal and regulatory spanners into the wheels of the arbitration machinery.

The Supreme Court should allow the arbitration to continue and accept the arbitration award to both sides of the dispute. This will go a long way in restoring India’s credibility as a law-and-rules economy.