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Asia's richest man and Reliance Chief Executive Mukesh Ambani (L); Jeff Bezos, the world's richest man and founder of Amazon (R). /VCG
Two of the world's richest men, Jeff Bezos and Mukesh Ambani, have locked horns over an Indian grocery firm called Future Retailer, part of Indian conglomerate Future Group, which struck separate deals with American e-commerce giant Amazon, founded by Bezos in 1994, and Ambani-ledReliance Industries.
Both Amazon and Reliance are looking to pump up their e-commerce grocery business in India, and that's where the world's richest man, Bezos, is facing unprecedented competition from Asia's wealthiest person, Ambani.
In August 2019, Amazon invested in a promoter entity of Future Retail, called Future Coupons, acquiring a roughly 4.5 percent stake in Future Retail. A year later, Reliance Retail announced it had entered an agreement with Future Group to take over its retail, wholesale, logistics and warehousing businesses for about $3.4 billion.
Amazon contends that the 2019 contract includes a non-compete clause, which forbids Future Retail and Future Group from conducting business with 30 entities, including Reliance. The company accuses Future Group of violating the terms of the deal, which supposedly gave it the right of first refusal to acquire more shares in Future Retail.
Amazon logo seen on a smartphone screen, New Delhi, India. /VCG
On October 5, 2020, Amazon approached the Singapore International Arbitration Centre (SIAC), which later issued an interim order, directing the Future Group to put its deal with Reliance on hold. In January, the SIAC formed a panel to hear arguments in the last lap of the proceedings.
On February 15, India's leading daily the Times of India published a report saying that the Future Group alleged Amazon demanded $40 million for withdrawing its "right of first refusal," citing the documents submitted with the SIAC.
Back in India, Amazon approached Supreme Court (SC) on February 11, calling the Future-Reliance deal "illegal" and "arbitrary." The move came after the Delhi High Court overturned a previous single judge decision that ordered all parties to maintain status quo. Last month, Amazon requested the Delhi HC to enforce the SIAC's preliminary verdict in the case.
Reliance and Future Group have denied any wrongdoings, asserting that their engagement is fully "enforceable under Indian law."
Reliance Retail is taking on foreign rivals such as Amazon and Flipkart, which is owned by Walmart. /Reuters
Battle for retail supremacy
India's retail market, with its worth estimated to be around $60 billion, is one of the fastest growing in the world. According to a report published by the India Brand Equity Foundation in November 2020, Indian online grocery market is estimated to exceed sales of about $3.19 billion in 2020, a 76-percent jump over the previous year.
The country's e-commerce business will reach $99 billion by 2024, growing at a compound annual growth rate of 27 percent over 2019, predicted the report.
Reliance, one of the largest and most powerful companies in the country, permeates in all aspects of Indian life – from telecommunications, entertainment, e-commerce, agriculture, retail, fashion, oil and gas, among others. If the Future-Reliance deal gets a green signal, it will gain access to more than 1,800 stores across 420 cities in India.
Amazon, which possess great global market muscle, said in its petition to the SC that it was trying to avert "irreparable harm."
"The more progress is made to complete Future-Reliance deal, the harder it will be to unravel it."
In January 2020, India initiated an anti-trust probe into Amazon after a retail trade group alleged anti-competitive practices against small- and medium-sized business. The investigation was later stalled after the U.S. behemoth appealed to a local court.
Amazon Seller Services, the India online marketplace unit of Amazon, recorded a 43-percent surge in revenue to $1.5 billion in 2020 from $1.043 billion in 2019.
If it clinches a victory against Future-Reliance deal, Amazon, which is the latest high-profile foreign brand to flounder in the muddy waters of Indian corporate environment, will surely pare down its local rival's e-commerce ambitions, at least for now.
