Due to the controversy over an Indian grocery company, the world’s largest e-commerce company Amazon and India’s largest company Reliance have come face to face.
Both these companies are in trouble because both of them have done different deals with the same Indian retail company Future Group. Experts say that the future of e-commerce in India depends on this legal battle of Reliance with Amazon in the coming years.
Satish Meena, a senior future analyst at Forrester Consultancy, told the BBC, “I think it’s a big deal. Amazon has not faced such a rival in any market.”
Amazon has made its founding owner Jeff Bezos the richest man in the world. (Although, he is no longer the richest man.) Amazon has changed the business of retail on a global scale. But Mukesh Ambani, the owner of Reliance, is also India’s richest man and his history has not given up so easily.
Industry analysts believe that in the retail sector, they will be the challengers to Amazon and Walmart’s Flipkart. What is the dispute about the Future Group?
What is the dispute about the Future Group?
Future Group signed a deal with Reliance to sell retail assets worth US $ 3.4 billion earlier this year. Amazon has a 49 percent stake in Future Coupons since 2019. Because of this, Amazon has an indirect ownership stake in Future Retail. Amazon says that according to this agreement Future Group cannot deal with select Indian companies. Reliance is also included in this.Future retail business has been severely affected due to the Corona virus epidemic. The company says that this deal with Reliance is very important to keep the company alive.The recent decision of the court has been in favor of Future Group. Last Monday, the Delhi High Court overturned the decision a week ago under which the deal was stayed. Amazon has appealed against the court’s recent decision.
What is at stake?
If Reliance gets the approval of this deal, then it will have access to more than 1800 stores in 420 cities in India. With this, he will also have access to the wholesale and logistics of Future Group.
Sathish Meena says, “Reliance has the money and the influence it needs in the market. Even if they don’t have expertise in the e-commerce business.” If Amazon succeeds, it can push Reliance’s plans in the field of e-commerce.
BBC Business Correspondent Nikhil Inamdar says that the battle between these two richest businessmen in the world shows how much is at stake in the field of e-commerce for Bezos and Ambani. It is also a sign of how difficult it is for foreign traders to do business in India.
According to Nikhil Inamdar, Amazon is a recent example of this in large foreign companies, which has suffered such irregularities with its Indian partner in which external arbitration orders have not been followed. Apart from this, he has not received full support even in the local court. India has recently seen defeat in the tax dispute against two important companies, Karen Energy plc and Vodafone. However, the order has been challenged in the case of Vodafone.
Rupa Subramanya, a fellow of the Asia Pacific Foundation of Canada, tells the BBC, “There is no doubt that foreign investors will look at these conditions and take it as a desperate situation. India’s position as a reliable place to invest and trade.” This will negatively affect the image.
“Nikhil Inamdar says that Amazon is not going to leave this battle without fighting because Reliance will get “extra profit” from it, in the words of analysts. But of course, fighting for Amazon against a domestic company like Reliance is not the same as fighting on par.
Government regulations prevent foreign e-commerce companies from selling their products directly to consumers. This is widely seen as a protectionist policy that benefits local retailers.
Amazon is also suffering the brunt of Prime Minister Narendra Modi’s call for a self-reliant India as it will follow strict norms regarding the use of data. This will harm the interests of companies like Amazon.