Amazon and NCLAT : Daily Current Affairs

Relevance: GS-2: Statutory, regulatory and various quasi-judicial bodies.

Key phrases: NCLAT, CCI, Ministry of Corporate affair, competition, monopoly,

Why in News?

Amazon has filed an appeal against the Competition Commission of India's suspension of its deal with Future Group at the National Company Law Appellate Tribunal (NCLAT).

What is future Deal and CCI Issue with it?

In 2019, Biyani’s Future Retail had signed another deal with global e-commerce giant Amazon. As part of the deal, Amazon had acquired 49 per cent stake in Future Coupons, the promoter firm of Future Retail in a deal worth nearly Rs 2,000 crore.
The deal had also given Amazon a ‘call’ option, which enabled it to exercise the option of acquiring all or part of Future Coupon’s promoter, Future Retail’s shareholding in the company, within 3-10 years of the agreement.
In August, 2020, Biyani’s Future Group entered into an agreement with Reliance Retail, a subsidiary of the umbrella Reliance Industries Limited (RIL) group, to sell its retail, wholesale, logistics and warehousing to the latter.
After Future’s agreement with Reliance, Amazon said the deal was a violation of a non-compete clause and a right-of-first-refusal pact it had signed with the Future Group. The deal also required Future Group to inform Amazon before entering into any sale agreement with third parties.
On its part, the Future Group has said that it had not sold any stake in the company, and was merely selling its assets and had therefore not violated any terms of the contract. This brought the issue to CCI.
CCI objection: The CCI said it has concluded that Amazon “misled” the regulator about its intentions regarding its investment in FCPL. The CCI in its order noted that the company had “misled the Commission to believe, through false statements and material omissions, that the combination and its purpose were the interest of Amazon in the business of FCPL” and suppressed “the purpose of establishing strategic alignment and partnership between Amazon Group and FRL (Future Retail Ltd) as well as have a ‘foot-in-the-door’ in the India retail sector.”

What is National Company Law Appellate Tribunal?

The National Company Law Appellate Tribunal (NCLAT) is a tribunal which was formed by the Central Government of India under the Companies Act, 2013.
The NCLAT was formed as a body with an appellate jurisdiction at the same time when NCLT was established as a major reform as per powers granted to the Ministry of Corporate Affairs in India.
National Company Law Appellate Tribunal (NCLAT) was constituted under Section 410 of the Companies Act, 2013 for hearing appeals against the orders of National Company Law Tribunal(s) (NCLT), with effect from 1st June, 2016.

Objectives:

Hear appeals against the orders passed by NCLT(s) under Section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC) and orders passed by Insolvency and Bankruptcy Board of India under Section 202 and Section 211 of IBC.
Hear and dispose of appeals against any direction issued or decision made or order passed by the Competition Commission of India (CCI), as per the amendment brought to Section 410 of the Companies Act, 2013 by Section 172 of the Finance Act, 2017, with effect from 26th May, 2017.

Composition:

The NCLAT includes a Chairperson, a judicial member, and a technical member. It consists of a total of not more than eleven members.
The President appointed the chairperson and Judicial Members of the Appellate Tribunal after consultation with the Chief Justice of India.
The Members of the Tribunal and the Technical Members shall be appointed on the recommendation of a Selection Committee consisting of:
Chief Justice of India or his nominee as a Chairperson, A senior Judge of the Supreme Court or a Chief Justice of High Court, Secretary in the Ministry of Corporate Affairs, Secretary in the Ministry of Law and Justice, Secretary in the Department of Financial Services in the Ministry of Finance as a Member.

Eligibility:

Chairperson should be/been judge of the Supreme Court or should be/been Chief Justice of the High Court.
Judicial Member is/has been a judge of a High Court or is a judicial member of a tribunal for 5 years or more.
Technical member is Person with proven ability, integrity and standing having special knowledge and experience of 25 years or more (in specified areas).

Competition Commission of India

The Competition Commission of India (CCI) is the chief national competition regulator in India.
Competition Commission of India (CCI) is a statutory body of the Government of India responsible for enforcing the Competition Act, 2002, it was duly constituted in March 2009.
It is a statutory body within the Ministry of Corporate Affairs in order to promote competition and prevent activities that have an appreciable adverse effect on competition in India.
The CCI looks into cases and investigate it if the same has negative impact on competition.
CCI also approves combination under the act so that two merging entities do not overtake the market.

Why do we need Competition laws?

Competition policy is about applying rules to make sure businesses and companies compete fairly with each other. This encourages enterprise and efficiency, creates a wider choice for consumers and helps reduce prices and improve quality.
- Low prices for all: the simplest way for a company to gain a high market share is to offer a better price. In a competitive market, prices are pushed down. Not only is this good for consumers - when more people can afford to buy products, it encourages businesses to produce and boosts the economy in general. Ex. Decrease in rate of internet plan due to Jio.
- Security against market distortions: These laws are necessary to prevent the market from being harmed due to failures and distortions, and there is a constant risk of various players resorting to anti-competitive activities such as cartels and abuse of dominant position in the market, etc.
- Better quality: Competition also encourages businesses to improve the quality of goods and services they sell – to attract more customers and expand market share. Quality can mean various things: products that last longer or work better, better after-sales or technical support or friendlier and better service.
- Innovation: To deliver this choice, and produce better products, businesses need to be innovative – in their product concepts, design, production techniques, services etc.
- Better competitors in global markets: Competition within the India helps make Indian companies stronger outside the India too – and able to hold their own against global competitors.

Source: Economic Times

Mains Question:

Q. In the growing situation of mergers of company in Indian economy discuss the importance of CCI. Why is competition policy important for Indian consumers? Critically examine.