In a recent turnaround from an approval granted earlier vide its order dated 28 November 2019 ( "approval order") to the now famous Amazon-Future Group deal, India's fair market watchdog , has , acting on a complaint filed by the Future Group , not only suspended its approval but also has imposed a penalty of INR 202 crores on Amazon Inc. , mainly for "Gun jumping" that is obtaining approval by suppressing material facts in particular from the CCI, while filing the notice for the ex-ante approval for the deal in July 2019.

The media is confused and vaguely tried to explain this overturn by CCI, which is, till date, unprecedented. CCI has, till date, never withheld or suspended its approval once granted to a combination. It is for the first time that CCI has exercised such "extraordinary jurisdiction" to "suspend" an approval order issued over 2 years back, which colloquially amounts to "unscrambling an omelet" , the phrase which we1 in CCI  used to describe  during its advocacy seminars before 2011 in support of India's  mandatory and suspensory merger control regime .  You may read the story Explained : Why CCI withdrew approval for Amazon's investment in future group, published in the Indian Express on 23 December ,2021.

"Gun jumping" is a colloquial term often used in competition law to describe the situation when merging parties fail to notify a merger to the competition authority, implement all or parts of the merger during mandatory waiting periods or co-ordinate their competitive behaviour before closing, this is commonly called "gun jumping". This phrase originated from track and field races and was known since the early 1900s. It refers to athletes starting the race before the gun was fired (which was used to signal to start of the race). This phrase was preceded in America by "beat the gun"!!

Gun jumping, can occur in two distinct contexts i.e., procedural gun-jumping and substantive gun jumping. Procedural Gun jumping means that the  merging parties fail to comply with the waiting period or file the statutory notice to CCI within 30 days from the date of taking the binding decision to merge (prescribed under Section 6(2A) of Competition Act) under the merger control regulations. Substantive Gun jumping implies that the merging parties coordinate their competitive conduct or consummate the transaction prior to the approval by CCI resulting in contravention of the objective of the Competition Act. In simpler words, substantive gun jumping means completing a deal without obtaining the mandatory regulatory approval.

In the Indian context, although the term is nowhere defined or mentioned under the Competition Act, 2002 (the Act) , yet section 43A of the Act prescribes a penalty up to one percent of the total turnover or assets of the enterprise, whichever is higher on the person or enterprise which fails to give notice2 to the Commission about any "combination"  ( acquisition of shares, voting rights, assets  or control  of one or more enterprise by another enterprise or group, merger or amalgamation between enterprises or groups of enterprises) . The term "combination" is defined under section 5 of the Act.

Section 44 of the Act prescribes a penalty up to Rupees one crore for any party which either makes a false statement or omits to state any material fact. Similarly, Section 45 of the Act prescribes a penalty up to Rupees one crore to any person who makes any false statement or omits to state any material fact knowing it to material or willfully alters , suppresses or destroys any document which is required to be furnished . Sub section (2) of section 45 also additionally empowers CCI to pass "such order as it deems fit".  

The Competition Commission of India vide its order dated 17 December 2021 has found Amazon NV Investment Holdings LLC (Amazon) guilty of contravening sections 43-A, 44 and 45 of the Act. Accordingly, the CCI suspended the approval given to Amazon for acquiring 49% shareholding in Future Coupons Private Limited (FCPL) (  order dated 28 November 2019) and has imposed a collective penalty of INR 202 crores on Amazon.

The moot question which will emerge before the Appellate Tribunal, the National Company Law Appellate Tribunal (NCLAT) , is whether Amazon has been rightly held to have suppressed or withheld vital information about the deal from CCI and whether the approval obtained by it from the regulator suffered from the vice of Suppressio Veri or Suggestio Falsi ??


According to Amazon's Notice under section 6(2) of the Act (Notice), three transactions were notified before the CCI.

  1. Issue of Class A voting equity shares of FCPL to Future Coupons Resources Private Limited (FCRPL) (Transaction I);
  2. Transfer of shares of FRL held by FCRPL representing 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 II) and;
  3. Acquisition by Amazon of the Subscription Shares representing 49% of the total issued, subscribed and paid-up equity share capital of FCPL (on a Fully Diluted Basis) (Transaction III).

 In pursuance of these transactions, Amazon also informed the CCI of a share-subscription agreement (FCPL SSA) that sets out the terms and conditions, and a shareholders' agreement (FCPL SHA) which set out the rights and obligations of the shareholders.

Prior to Amazon's acquisition of shares, FCPL had acquired equity warrants of FRL, convertible into equity shares representing 7.30% of the share capital of FRL (Warrants Transaction) which was approved by the CCI through its  order dated 15.04.2019. In furtherance of this Warrants Transaction, a shareholders agreement was entered into by the parties (FRL SHA). Interestingly, the FCPL SHA included the requirement of prior written consent of Amazon for FCPL to decide on or implement any matter under FRL SHA. Moreover, several commercial agreements (BCAs) were executed between Amazon and the Future Group to consolidate Amazon's presence in the retail market. However, neither the FRL SHA nor the BCAs were notified, as Amazon argued they were not independent of the combination.

Proceedings before the CCI

In its show-cause notice issued under regulation 14 of the  Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (Combination Regulations), the CCI had found several contradictions in the submissions of Amazon before other fora and the competition regulator regarding the strategic interest of Amazon in FRL. In fact, the CCI had previously raised similar queries in letters dated 9 October 2019 and 24 October 2019. However, Amazon had clarified in its submissions dated 15 November 2019 that it was interested in the 'corporate gift cards' business of FCPL and intended to expand its portfolio of investments in the payments landscape of India. It was also submitted that Amazon neither has direct nor indirect shareholding in FRL and that the rights conferred by the FCPL SHA were merely for the protection of its investments. However, these averments are essentially nullified considering the following details.

Internal Correspondence

Considering the proceedings initiated by FCPL, fresh evidence was brought on record. This included (1)the internal note dated 24 May 2018 showed that the investment would help Amazon (a) expand coverage in top four cities and improve the merchant fee to 13.5%; (b) build a two-hour-delivery service in the next 20 cities; (c) exclusively carry their private label portfolio in grocery and value-fashion and; (d) obtain option value to increase its equity stake when laws change (2) the situation update dated 10 July 2018 elaborated the background and purpose with which the combination was contemplated between Amazon and Future Group. The situation update showed that Amazon viewed the arrangement as a means to utilize the FRL's pan-India store infrastructure to boost Amazon's ultra-fast delivery program, exclusively carry private label portfolio in grocery and value fashion (where Amazon was allegedly lagging behind its competitors), and drive higher fees for Amazon (3) an internal e-mail dated 18 July 2019 demonstrated that in light of the FDI restrictions, Amazon would use a twin-entity investment structure to invest in FRL, i.e., Amazon would acquire 49% shareholding in FCPL, which in turn would hold 8 to 10% of the shareholding in FRL. Lastly, it also listed out several benefits provided by FRL to Amazon in pursuance to the BCAs.

False, incorrect and incomplete disclosure of information

Item 5.3 of Form I: The notifying party is required to disclose the economic and strategic purpose of the combination under this head. However, the internal correspondence clearly highlights how the true purpose of the combination was concealed.

Item 8.8 of Form I: The notifying party is to furnish documents and material considered by or presented to the board of directors or key managerial person of the parties to the combination or their relevant group entities, in relation to the proposed combination. Amazon had merely submitted a presentation highlighting the gift voucher business of FCPL, its business operating model, estimated five-year business size, organisation design, sales team and financial summary, without any reference to FRL. In fact, the entire internal correspondence was not disclosed and was actively concealed.

Regulation 9(4) read with Items 5.1.1, 5.1.2, 5.2 of Form I: This provision makes it mandatory for parties to the combination to give a notice covering all inter-connected steps of their proposed combination (being disclosures to be made against item 5.1.2).  Moreover, item 5.2 requires the timelines of each inter-connected step to be disclosed. Amazon had only identified three transactions and the FCPL SHA and FCPL SSA as agreements that formed a part of the combination. The FRL SHA and BCAs were not disclosed against any of the abovementioned items.

Suspension & Penalty

The CCI held that Amazon failed to notify FRL SHA and the BCAs as parts of the Combination between the parties and suppressed the actual purpose and particulars of the combination, in contravention of the obligation contained in subsection (2) of section 6 of the Act read with regulation 9(4) of the Combination Regulations.

Further CCI under section 45(2) of the Act, directed Amazon to give notice in Form II within a period of 60 days, and, till disposal of such notice, the approval granted to the combination 'shall remain in abeyance'.

The CCI imposed a penalty of INR 202 crores under section 43-A of the Act. Moreover, in the absence of any mitigating factor, the CCI imposed the maximum penalty of INR 1 crore under sections 44 and 45 of the Act respectively, thereby, collectively amounting to a penalty of INR 202 crores.

Comment: The CCI order "suspending " an approval granted over 2 years back , howsoever justified it may be (considering the strong  evidence of willful suppression of Amazon's strategic intentions , aptly described in its internal notes as "to have a foot-in-the-door to acquire more in this strategic asset, should we so desire at the time") will definitely raise some basic jurisdictional issues about CCI's power to retrospectively withdraw or even suspend its approval order in the light of the statutory embargo of maximum one year time limit imposed under the proviso to sub section (1) of section 20 of the Act. Since the order has since been challenged by Amazon before the Appellate Tribunal , no further comments are called for at this early stage .  


1 I was a part of CCI during its formative years till 2008.

2 Under sub section (2) of section 6 of the Act

Originally Published by Antitrust & Competition Law Blog on 14 January 2022

Specific Questions relating to this article should be addressed directly to the author.

Article by MM Sharma, Head Competition Law & Policy Practice, Vaish Associates, Advocates, New Delhi, India

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