Amazon Sends Legal Notice to Future Group Citing Contractual Breach

The e-commerce giant Amazon has sent a legal notice to the Future Group for striking a deal with Reliance Industries. The legal notice states that the Future-RIL transaction cannot proceed further with Amazon permitting on the non-compete clause that has been earlier entered with the retail group.

In August, it was reported that Reliance would take over the retail and wholesale business of Future in a $3.38 billion worth deal. Thus, Amazon’s investment in Future Group venture with contractual rights that include a right of first refusal and a non-compete-like pact. This could be the major reason for Amazon to serve the legal notice. The notice cited that the contract arrangement includes the restricted list of companies that Future Group is not allowed to enter deals with.

According to sources, Biyani has first approached Amazon to take over of the Future Group companies prior to defaulting it to its lenders and suppliers. But, Amazon had denied the proposal thus, the Biyani group initiated talks with Reliance. However, Reliance has just brought the assets and not the company, states a banker.

In 2019, Amazon has acquired a 49 percent stake in Future Coupons that owns a 7.3 percent interest in the retail group that functions at more than 1,500 stores across the country that includes Big Bazaar as well.

“Amazon lost around $193 million in its Future investment. The legal action against the Future is to ring-fence itself from any class suit back home in the United States as shareholders may ask questions why they lost money in Future,” says another banker.

In August, Reliance Retail Ventures Limited (RRVL) had announced to acquire the entire retail, wholesale, logistics and warehousing businesses of the Future Group on a going concern basis for Rs 24,713 crore. The Lenders, who had substantial exposure to the Future group, had assisted the transaction. After closing the deal, Future Enterprises Ltd (FEL) — in which all Future group companies were merging — was left with consumer products business and stake in two insurance ventures.

An executive states that when Reliance and Future ventured the deal, Amazon was not informed. However, for the past few months, Amazon has been taking efforts to reach out to the Future Group but it is not fruitful. Thus, left with no other option Amazon, has served them a legal notice citing a breach in the contractual agreement.

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