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Amazon internal e-mails show company lied, suppressed facts on Future deal: CCI

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The Competition Commission of India (CCI) said Amazon suppressed facts, made false statements and misled the regulator, as could be seen from the company’s internal e-mails, the genuineness of which the e-commerce giant did not contest.

Amazon internal e-mails show company lied, suppressed facts on Future deal: CCI
While suspending its approval for the Amazon-Future deal, the Competition Commission of India (CCI) noted that Amazon suppressed facts, made false statements and misled the regulator, as could be seen from the company’s internal e-mails. CCI said that Amazon did not contest the genuineness of the e-mails.
Besides suspending the deal, CCI also imposed a Rs 202 crore penalty on Amazon.
In its submission to CCI, Amazon had said that its rationale for investing in Future Coupons Private Limited (FCPL) was “the business potential of FCPL to create long term value and provide return on the investment".
However, noted the CCI, the internal correspondence of Amazon clearly showed that idea behind the move was to get a foot in the Indian retail sector and secure rights over Future Retail considered as strategic by Amazon.
Below is an excerpt from the CCI order.
 In its response to the letters dated 9th October, 2019 and 24th October, 2019 of the Commission, Amazon had continued with the suppression of actual purpose of the combination.
 Amazon has not contested the genuineness of the Internal Correspondence or their contents. It is obvious that the purpose of Amazon to pursue the combination was not the potential of the gift and loyalty card business of FCPL, as has 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. Further, it is clear from the above discussed e-mail dated 19th July, 2019 that the entire consideration of the Combination has been arrived at on the basis of 25 percent premium to the regulatory price of FRL shares and that such premium was paid on account of the strategic rights and the call option provided to Amazon.
 Thus, the instant matter is a clear, conscious and willful 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.
Further, Amazon has 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 the business potential of FCPL was a consideration for Amazon to pursue the Combination.
Seen in the context of the internal correspondence and failure to provide any of the said material and/or explanation, it is evident 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. Seen against the backdrop of internal correspondence, the statements of Amazon in the Notice and subsequent submissions dated November 15, 2019 regarding the purpose of the combination, stand belied.
It is evident that these statements have been made with full knowledge that the same are false in material particulars. 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.
It is pertinent to note that Amazon suppressed the actual purpose of the Combination; the fact that FRL Shareholder Agreement was executed to ensure that Amazon indirectly gets the strategic rights over FRL; and the BCAs are parts of the Combination. When seen in totality, the Commission is of the considered view that the claim of purported omission to add the words “which was executed subsequent to the Warrants Transaction” is an afterthought and not an inadvertent omission.
Amazon now claims that there was no reason for it to represent that the FRL SHA was negotiated independent of its investment in FCPL. In such a case, Amazon ought to have disclosed FRL SHA and related material particulars against Items 5.1.1, 5.1.2 and 5.2 of Form I.
Thus, the Commission is not inclined to persuade itself to accept the plea of ‘omission’ taken by Amazon, and the Commission has no hesitation in holding that the same is clearly an attempt in afterthought.”
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