Amazon accuses Future of insider trading

Amazon has shot off yet another letter to market regulator Sebi, accusing Future Retail of insider trading and called for an investigation as the US online retailer looks to ratchet up pressure against the Future-RIL deal.

Future Group, however, vehemently denied the charges, saying these allegations were "Amazon's ill-motivated attempts to throw everything at the situation to stultify the transaction."

According to sources, Amazon has written to Sebi on the matter for the second time on November 8.

In its letter, it accused Future Retail Ltd (FRL) of insider trading and requested an investigation.

The development assumes significance as the Delhi high court on Wednesday continued its hearing over Future Retail's petition that alleged Amazon was interfering in its deal with Reliance Retail based on an interim award by a Singapore arbitrator.

"By disclosing material and unpublished price sensitive information as regards the issuance of the interim award to a proposed acquirer, prior to dissemination of such information by FRL to the general public, FRL and its promoter have acted contrary to Regulation 3 of the PIT Regulations…," Amazon said in its letter.

PIT refers to prohibition of insider trading norms.

It also added that FRL's directors have "failed to perform their fiduciary duties towards their shareholders".

"This breach by FRL and its promoters is completely inimical to the interest of public shareholders (who were not provided any details about the interim award) and created an information asymmetry in the market, in breach of the PIT Regulations and should be investigated by Sebi," it said.

Future Group has signed a pact for selling its retail business to Reliance Industries Ltd for Rs 24,713 crore.

Amazon declined to comment on the matter, while comments from Sebi could not be elicited immediately.

However, a Future Group spokesperson denied the charges made in Amazon's second letter to Sebi, saying "Amazon maybe needs some tutorial on the law on insider trading."

"This interim order purported to injunct a transaction between us and Reliance. Proprietary and legality demands that in such an event, the counterparty is informed about the development, however infirm the injunction may be," the spokesperson said.

Sebi regulations too are quite clear on this and communication was for a legitimate purpose, the spokesperson added.

Future Group and Amazon have been locked in a battle after the US-based company dragged its partner into arbitration over alleged breach of contract.

On October 25, the Singapore International Arbitration Centre (SIAC) passed an interim award in favour of Amazon, with a single-judge bench of V K Rajah barring FRL from taking any step to dispose of or encumber its assets or issuing any securities to secure any funding from a restricted party.

"The law apart, it is basic common sense that a counterparty is to be kept informed - not sure what approach Amazon adopts in conducting business, but this is basic courtesy covered by the law too," the Future Group spokesperson said.

The spokesperson further stated that "any news report giving credence to Amazon's ill-motivated attempts to throw everything at the situation to stultify the transaction, would be improper."

Amazon's statement on October 25 evening said it welcomed the interim judgement and that the order had granted all the relief it had sought. A few hours later, Reliance issued a statement saying Reliance Retail Ventures Limited (RRVL) "is informed of an interim order passed by the Emergency Arbitrator" and that it intended to enforce its rights and complete the transaction in terms of the scheme and agreement with Future Group without any delay.

The next day, Future Group issued a statement saying it had "received a communication from the SIAC, enclosing an interim order of the Emergency Arbitrator in the arbitration proceedings under shareholders' agreement between Amazon, Future Coupons Private Limited and the promoter group".

FRL had said it was examining the communication and the order and noted that it was not a party to the agreement under which Amazon had invoked arbitration proceedings.

In a previous regulatory filing, FRL has stated that Singapore arbitrator's interim order against its deal with RIL is "not binding" and any attempt to enforce it will be "resisted".

The company then moved the Delhi high court on November 7, contending that Amazon is 'misusing' the interim order and "interfering" with its deal with RIL.

Last month, Amazon had written to Sebi and stock exchanges, urging them to take into consideration the interim judgement while reviewing the proposed transaction.

In 2019, Amazon had agreed to purchase 49 per cent of one of Future's unlisted firms -- Future Coupons Ltd -- with the right to buy into flagship Future Retail Ltd after a period of three to ten years. Future Coupons holds 7.3 per cent equity in BSE-listed Future Retail Ltd -- that operates popular supermarket and hypermarket chains such as Big Bazaar -- through convertible warrants.

The e-commerce giant had dragged Future to arbitration after the indebted Kishore Biyani group firm signed a pact to sell retail, wholesale, logistics and warehousing units to billionaire Mukesh Ambani's Reliance in August this year.

Amazon's argument is that Future violated the contract by entering into the deal with rival Reliance.

Amazon, Reliance and Walmart Inc's Flipkart are locked in a battle to gain market share in India.

The booming e-commerce market in the country will be worth $86 billion by 2024, according to research firm Forrester.

The stakes are particularly high for Amazon, which believes India is a big growth market after shutting its online store in China last year.

The oil-to-telecom conglomerate Reliance has since September 9 sold an 8.48 per cent stake in its retail unit to investors such as Silver Lake, KKR and Mubadala for Rs 37,710 crore to expand its so-called new commerce venture, which uses neighbourhood stores for online deliveries of groceries, apparel and electronics.

The firm, whose retail operations already runs close to 12,000 stores, is looking to dislodge Amazon and Flipkart, which together control about 70 per cent of the online market in India.

Photograph: Abhishek N Chinnappa/Reuters