The penalty of Rs 200 Crore is imposed by the Competition Commission of India on Amazon: NCLAT

The National Company Law Appellate Tribunal(NCLAT) has upheld an order of the Competition Commission of India which imposed a Rs 200 crore penalty on Amazon for failing to reveal crucial information about the acquisition of a 49% stake risk in Future Coupon Private Limited. The ₹200 crore penalty was imposed for Amazon’s failure to identify and notify the future retail limited shareholders agreement as a part of the deal which was an obligation under section 6(2) of the competition act, 2002. 

The proceeding against amazon was initiated based on an application of Future Coupon Private Limited (FCPL). Amazon had notified CCI about acquiring a stake in FCPL. A notification regarding the same was given by Amazon to section 6(2) of the competition act in the procedure regarding the transaction of business relating to the combination. A senior lawyer Harish Salve representing FRL and Mukul Rohtagi appeared for FCPL to find ways to settle. They agreed to a proposal by Amazon through counsel Gopal Subramanium and Amit Sibal to represent amazon before CCI. 

The right of Amazon over FRL is at the heart of the negotiation and the need for FRL was to achieve the said objective of the combination. It is for these strategic rights and calls for an option that Amazon had paid a premium of 25% over the share price of FRL. This makes it clear that neither the FRL would have been executed in the absence of the other steps or transaction of the combination nor would amazon have gone ahead with the transaction in the absence of FRL(Future Retail Limited), this is stated by the competition commission of India. The CCI also added that Amazon has to notify the combination consisting of all the following steps mentioned under the regulation of combination.  

The court has imposed an order on Amazon for 45 days to deposit the penalty and comply with the CCI order. As Amazon failed to notify FRL(Future retail limited)  and the commercial arrangements as part of the combination between the parties and suppressed the actual purpose of the combination.

Section 5 and section 6 of the competition act, 2002 deal with the combination and the regulation of combination. The acquisition of one or more enterprises by one or more persons or merger or amalgamation of enterprises shall be a combination of such persons or enterprises. 

Section 6 deals with the regulation of combinations such as no person or enterprise entering into the combination which hurts competition. Subject to the provision any person or enterprise which proposes to enter into a combination gives notice to the commission disclosing the details of the proposed combination. The public financial institution, investors bank or venture capital fund shall within seven days from the date of acquisition. 

To maintain the healthy competition between the competitors the company has to regulate with the provision of a combination. As in the given case, CCI imposed a fine of ₹ 200 crores on Amazon for not regulating with the mentioned provision of combination in CCI not following the provision of combination. It will be faced by any companies if they will not maintain a healthy environment in acquiring any other company.