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What should be an ordinary commercial dispute between Amazon and the founders of a near-bankrupt retailer is shining a harsh light on the quality of legal and regulatory protection investors actually receive in India. The long drawn-out saga has thrown up two questions for prospective investors and those already invested. First, what does a go-ahead from India’s antitrust authority mean if an entire chain of investment based on that approval has to be unwound or reversed after two years? Second, can one rely on international arbitration to enforce Indian contracts, or will local courts throw a spanner in alternative dispute-resolution mechanisms?

Last month, Amazon was fined $26.7 million by the Indian competition watchdog. Worse, its $192 million capital infusion in Future Coupons— a 2019 transaction—was put “in abeyance" for being economical with disclosures. The commission said it was denied an opportunity “to assess the effects of the actual combination" that gave Amazon strategic rights over publicly-traded Future Retail. Never mind that those “effects", even if the trustbuster did get a chance to study them, are unlikely to have included concentration of power in the retail industry, for the simple reason that Amazon is not a retailer in India. It’s an online marketplace for buyers and sellers.

Globally, what constitutes abuse of dominance is expanding beyond price fixing. As part of its crackdown on its tech titans, Beijing imposed a record $2.8 billion antitrust fine on Alibaba Group for using data and algorithms to obtain an unfair advantage over merchants. Tencent was hauled up for not properly reporting past acquisitions and investments, and food-delivery app Meituan was punished for forcing restaurants into exclusive arrangements. Even outside China, large consumer tech platforms are facing scrutiny.

Amazon’s travails in India, however, have little to do with dominance. The US-based firm is barred by India’s foreign investment rules from acting as a retailer that owns or discounts inventory. That explains why Amazon sought to control Future Retail indirectly via its investment in Future Coupons. To keep on the right side of Indian law, the e-commerce giant has similarly kept its voting rights in another of its acquisitions, the grocery chain More, below 26%. In doing those deals, however, the US firm hasn’t started wielding outsize influence on India’s $800 billion-a-year consumer commerce. Mom-and-pop stores control 80% of the grocery market.

Future Retail founder Kishore Biyani did his deal with Amazon in 2019 because he was desperate: He wanted to channel funds to his debt-laden retail network, and Jeff Bezos was willing to play white knight. The competition regulator approved the deal. Amazon, though, insisted on a list of parties to which Future’s assets couldn’t be divested without its permission. On that list was Mukesh Ambani’s Reliance.

However, when the retail industry fell into an abyss after India’s covid lockdown in March 2020, Biyani turned around and sold his 1,500-plus stores to Reliance. Amazon began arbitration proceedings in Singapore for breach of contract, jeopardizing the $3.4 billion acquisition. Without that obstacle, Reliance’s own 37 million sq ft of retail space would by now have received a nice boost from Future’s 16 million sq ft. (Reliance is not a party to the legal squabbles between Future and Amazon.)

The freezing of the antitrust approval has put a question mark on the contract that Amazon is trying to enforce. When Future tried to use that loophole to get further hearings in Singapore quashed, a Delhi high court judge remarked that for arbitration to speedily settle disputes, interference by courts must be kept to a minimum. “If the parties are encouraged to approach the court at every stage of the arbitration proceedings, the whole purpose of the arbitration would stand frustrated," the judge said. Yet, a day later, a two-judge bench of the same court set aside the order, and stayed proceedings by the Singapore tribunal.

The clock is ticking. Future Retail recently missed a payment to banks, and Reliance’s offer to buy the stores from the cash-strapped firm expires in March. Yet the dispute over the fate of its assets isn’t resolved. Amazon is challenging the latest Delhi high court order at India’s Supreme Court and has appealed against the antitrust agency’s volte face before a company-law tribunal. And that’s the final point investors need to bear in mind: They must be ready for expensive and time-consuming litigation to protect the value of their transactions. The Indian government claims with some justification to have made India’s bureaucratic labyrinth easier for global firms to navigate. Once they do enter, however, contract enforcement can be a whole different story.

Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services.

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