Amazon has been handed a major legal victory in its fight to block a multibillion-dollar deal between two of India’s biggest retailers.
A court in the country’s capital, New Delhi, ruled on Tuesday that an agreement by Reliance Industries to purchase local rival Future Retail for $3.3 billion should be put on hold after Amazon (AMZN) objected to it last year. The Delhi High Court said it was “satisfied that immediate orders are necessary to protect the rights of [Amazon (AMZN)]” and ordered all parties involved in the deal to “maintain status quo” pending its final judgment.
“We have utmost respect for the Indian legal system and appreciate the interim order of the … Delhi High Court,” an Amazon spokesperson told CNN Business.
Future Retail said in a statement that it would “explore all legal remedies and take appropriate steps to pursue” its deal with Reliance. The company could potentially challenge any judgment in a higher court.
Reliance declined to comment.
The ruling is the latest development in what is shaping up to be a proxy battle between two of the world’s wealthiest men for India’s fast-growing online retail market. What’s at stake is strategic access to a network of popular grocery stores and retail shops in India, something both Jeff Bezos’ Amazon and Reliance — owned by India’s richest man Mukesh Ambani — want to either have for themselves, or to prevent the other from acquiring.
At the heart of the current battle is Future Retail, the cash cow of Indian conglomerate Future Group. The retail unit includes brands such as Big Bazaar, a popular supermarket chain. In August 2019, Amazon invested in a Future Group entity that gave it a roughly 4.8% stake in Future Retail as of September 30 last year, according to securities filings. The deal gave Amazon the right of first refusal to acquire more shares in Future Retail, according to one of the filings.
Amazon argued that the 2019 deal struck between it and the Future Group entity included a non-compete clause, a person familiar with Amazon’s perspective told CNN Business in October last year. The clause listed 30 restricted parties with which Future Retail and Future Group could not do business, and Reliance was on that list, the person said.
Amazon sought to enforce that agreement through the Singapore International Arbitration Centre (SIAC), with the Southeast Asian country often seen as a neutral jurisdiction to settle disputes. The SIAC emergency arbitrator ordered a temporary halt to the deal last October.
While Future Group had raised questions about the validity of the Singapore arbitration court’s order in India, the Delhi High Court declared Tuesday that the order is “enforceable.”
Amazon and Walmart (WMT)-owned Flipkart dominate online shopping in India, controlling more than 60% of the market between them. But Ambani and Reliance have made an aggressive play for a slice of that market through JioMart, an initiative announced in 2019 to bring online thousands of India’s mom-and-pop stores known as “kiranas.”
Ambani definitely has the resources to match Amazon. His tech subsidiary, Jio, has more than 400 million users, and Reliance Retail has more than 12,000 stores across India.
According to analysts, Future Retail’s 1,500-odd stores are not a must-have for either company but the legal fight could turn into an “ego battle” between the two billionaires.
And while it’s currently advantage Amazon, that battle is far from over.