NCLAT Upholds Imposition Of Rs. 200 Crores Penalty On Amazon By CCI As "Fair And Sensible"

The National Company Law Appellate Tribunal ("NCLAT"), New Delhi Bench, comprising of Justice M. Venugopal (Judicial Member) and Shri Ashok Kumar Mishra (Technical Member), while adjudicating an appeal in Amazon.com NV Investment Holdings LLC v Competition Commission of India & Ors., has upheld the order dated 17.12.2021 passed by the Competition Commission of India ("CCI") whereby Amazon was directed to pay Rs. 200 Crores penalty under Section 43A of the Competition Act, 2002. The NCLAT has directed Amazon to deposit the penalty within 45 days and comply with the CCI order. The Order is passed on 13.06.2022. Background Facts Amazon.com NV Investment Holdings LLC ("Amazon"), a subsidiary of Amazon.com Inc. Amazon wanted to notify a 'Combination', bearing Registration No. C- 2019/09/688, to the CCI through a Notification dated 23.09.2019 ("Notice"), as per Section 6(2) of the Competition Act, 2002, in Form I of Schedule II to the CCI (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 ("Combination Regulations"). The Combination was with respect to acquiring of 49% shareholding in Future Coupons Pvt. Ltd. alongwith other transactions. In 'Part V: Description of the Combination' of the aforesaid Notice, the Combination notified by Amazon comprised the following 3 transactions: Transaction I: The issue of Nine Million One Hundred and Eighty Three Thousand Seven Hundred and Fifty-Four (9,183,754) Class A voting equity shares of Future Coupons Pvt. Ltd ("FCPL") to Future Coupons Resources Private Limited ("FCRPL"). Prior to, and immediately post issuance of such equity shares, FCPL will be a wholly owned subsidiary of FCRPL; Transaction II: The transfer of Thirteen Million Six Hundred and Sixty Six Thousand Two Hundred and Eighty Seven (13,666,287) shares of FRL held by FCRPL (representing Two decimal Five Two Percent (2.52%) of the issued, subscribed and paid-up equity share capital of Future Retail Limited ("FRL"), on a Fully Diluted Basis) to FCPL; Transaction III: The acquisition of the Subscription Shares representing Forty Nine percent (49%) of the total issued, subscribed and paid-up equity share capital of FCPL (on a Fully Diluted Basis) by Amazon, by way of a preferential allotment. Amazon had also submitted that it did not have any direct or indirect shareholding in FRL and it would not acquire directly any rights in FRL. Amazon only had limited investor protection rights in FCPL with a view to protect the value of its investment in FCPL. These rights can be exercised only through FCPL and not directly by Amazon. Based on the information furnished by Amazon, the CCI had granted approval to the 'Combination' vide an order dated 28.11.2019. Proceedings Before CCI On 25.03.2021, the FCPL filed an application before the CCI under Sections 43A, 44 and 45 of the Competition Act, 2002 (Act, 2002), in relation to the acquisition of 49% shareholding in FCPL by Amazon. It was submitted that Amazon has 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 had taken completely contradictory stands in the arbitration proceedings and constitutional courts with respect to its investments in FCPL, as compared to the representations and submissions made before the CCI. Such contradictions were said to establish false representation and suppression of material facts before the CCI. The CCI was of the prima facie view that Amazon failed to identify and notify FRL Share Holding Agreement as a part of the 'Combination', in terms of Regulation 9(4) and Regulation 9(5) of the Combination Regulations; Amazon had concealed its strategic interest over FRL; and Amazon had made false and incorrect representations and concealed/suppressed material facts in contravention of the provisions of the Act, 2002. Accordingly, the CCI had issued a Show Cause Notice under Sections 43A, 44 and 45 of the Act, 2002 to Amazon, on 04.06.2021. After perusal of facts and materials on record, the CCI vide an order dated 17.12.2021 had arrived at the conclusion that Amazon had suppressed "the actual purpose and particulars" of the 2019 deal and sought to "establish false representation and suppression of material facts". It was observed that it was necessary to examine the deal afresh and hence its approval "shall remain in abeyance" until then. The CCI had also imposed a penalty of Rs. 200 Crore on Amazon for failing to identify and notify the FRL Shareholders Agreement as a part of the deal, which was an obligation under Section 6(2) of the Competition Act, 2002. "As regards 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 ...

NCLAT Upholds Imposition Of Rs. 200 Crores Penalty On Amazon By CCI As "Fair And Sensible"

Pallavi Mishra

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NCLAT Upholds Imposition Of Rs. 200 Crores Penalty On Amazon By CCI As "Fair And Sensible"

Pallavi Mishra

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INR 1099+GST

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