There is a full blown battle on between Amazon and Reliance Retail over the latter’s proposed acquisition of Future Retail. Reliance, a relatively late-comer to the e-commerce market, wants to catch up fast, and acquiring Kishore Biyani’s Future Group, that has built a large network of physical stores over the years, is crucial to Reliance’s strategy to take on Amazon. Significant in the current battle is the ‘nationalist’ maelstrom that has been whipped up to keep Amazon out.
References to ‘Big Brother’ Bezos coming in from the US to dominate India’s market are freely flying. Senior counsel Harish Salve, arguing for Future Retail in the Delhi High Court, said Amazon was behaving “like the East India Company of the 21st century.” Accusing Amazon of bullying, he said the e-tailer had given notice that “either you do business with me or we shut you down.”Meanwhile, Reliance Retail, echoing the repeated calls of ‘Atmanirbhar’ of the Prime Minister, has introduced ‘Indie’ and ‘Swadesh’ in its campaign, highlighting that it intends to promote the products of indigenous craftsmen.
PLAYING ‘NATIONALISM’
Mukesh Ambani and Kishore Biyani are not the first to play the ‘nationalist’ card. Others have done it in the past to beat back competition from foreign brands. Patanjali Ayurved, the `10,000-crore consumer products company promoted by Baba Ramdev and Acharya Balakrishna, sells its consumer and medicinal products by appealing to retailers to stock Patanjali products so that “together we can turn the Swadeshi Dream of Mahatma Gandhi, Bhagat Singh and Ram Prasad Bismil into a reality.” Subhash Chandra, promoter of the Zee Entertainment Enterprises (ZEE L), has in the broadcasting business, played the ‘nationalist’ David versus the powerful foreign Goliaths — NewsCorp who set up STAR and Sony Pictures Entertainment (SPE) which own the Sony channels in India.
ZEEL’s pitch has been that its content and ownership has been ‘Indian’ and therefore culturally more appealing to viewers. But scratch the surface, and there is very little ‘nationalist’ about Reliance or the Future Group. Reliance Retail has just finished several rounds of funding that saw the Singapore sovereign fund GIC invest `5,572 crore, San Franciscobased TPG Capital put in `1,837 crore and the Abu Dhabi sovereign fund Mubadala Investment Corporation `6,247 crore in the retailing company.
As many as 13 international funds have purchased a 34 per cent stake in Reliance Jio so far, including Google, Facebook, Silver Lake, Vista Equity Partners, General Atlantic, and KKR. Foreign investor holding in the mother company, Reliance Industries, which has raised close to `1.4 lakh crore, has risen to a record 27.2 per cent by the end of the second quarter ending September 2020. By no stretch of imagination are these Indian pedigrees!
LEGAL EMBARRASSMENT
The same goes for what the consumer retailing companies sell. Reliance Retail is as ‘Indian’ as Amazon in the sense both sell what Indians want. From T-shirts made in Bangladesh, to carpets woven in Mirzapur, they are market platforms for producers and brands the world over offering to connect them to Indian consumers. ‘Nat i o n a l i s t ’ gimmicks are okay for polling day, but the Indian consumer is not really ‘nationalist’ in his buying habits. For high-end buyers, Chinese OnePlus and Huawei smartphones will continue to sell. So will the low-end Oppo and Redmi.
The ‘nationalist’ campaign of Reliance and Future should have the government worried too. While Reliance and Future Retail have sworn in press releases to complete the deal, Amazon has written to market regulator SEBI as well as the stock exchanges not to allow consummation of the proposed marriage till the Singapore Arbitration court’s interim stay continues against Future’s buyout. This has been challenged by Future Retail in the Delhi High Court, seeking to stop Amazon’s ‘interference’ in the `27,000 crore deal. The arguments of the various parties are over and judgment is awaited.
The main leg of Future’s case is that the Emergency Arbitration invoked by Amazon in Singapore against Future Retail does not have jurisdiction in India. To this Amazon’s counsel, Gopal Subramanian has argued that the two parties had consented to settle their disputes through arbitration of the Singapore International Arbitration Centre’s rules, and the jurisdictional principle was ‘consent’.
Therefore, there is no question of ‘inherent’ lack of jurisdiction. If the Delhi High Court and thereafter the Supreme Court are to throw out Amazon’s case on lack of jurisdiction of the Singapore Arbitration Centre, international investors would see India jettisoning the well-established principles of dispute resolution. As it is, an international arbitration tribunal in The Hague in September has ruled that India’s imposition of a retrospective `20,000 crore tax liability on Vodafone, were in breach of an investment treaty agreement between India and the Netherlands. If foreign capital is to flow into India, a clean-up of the compliance system and an end to conflicting signals to investors is a must.