Why has Amazon sued ED? How is Reliance involved?

Amazon's legal battle over the Future group deal is getting interesting. Now, the Enforcement Directorate has been sued.

 |  4-minute read |   23-12-2021
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It isn’t often that we hear of cases where a government agency in India is sued by another entity. These kinds of stories seem to be limited to the US and the rest of the western world. But it seems like American e-commerce giant, Amazon, wants to change this status quo in India.

Amazon India is up in arms against the Enforcement Directorate, India’s financial crime-fighting agency. So much so, that Jeff Bezos’s company has dragged the government agency to the Delhi High Court.

Amazon sued the ED seeking to quash an investigation in its 2019 deal with the Future Group. It accused the agency of conducting a ‘fishing and roving’ inquiry, which means asking questions that are totally unrelated to the subject matter under investigation.

The case involves big names that we already know – Amazon, Future Group, and now the Enforcement Directorate itself. But it also involves Reliance and the Ambanis.

WHAT IS THE CASE ABOUT?

Amazon India is fighting a long-running battle with the Future Group. If you don’t know about Future Group, think Big Bazaar and EasyDay; these are some of the retail stores owned by the company.

The case pertains to Amazon’s Rs 1,430 crore stakes in Future Group. Using this investment, Amazon gained control of nearly 5% of its stake in Future Retail, giving it veto power in the company.

Amazon used its power in the company to block the buyout of Future Group by another company, which resulted in the bitter battle between the two, and which now involves the ED too.

In a setback to Amazon, the Competition Commission of India (CCI) recently suspended its deal with Future Group and fined it Rs 200 crore. A Business Standard report had stated that Amazon may drag CCI too to court.  

If that's true, there are one too many Indian government agencies Amazon will be going up against. Netizens aren't sure if Amazon should take the gamble when it's largely doing well in India. 

The ED is currently investigating the investment over suspicions that the American giant flouted foreign investment norms.

WHY IS AMAZON SUING ED?

Amazon has made quite some accusations against the Enforcement Directorate and its investigation into the 2019 deal. Amazon claimed in its 816-page court filing - seen by Reuters - that the ED sought ‘privileged legal advice and opinions from Amazon and other information not connected to the Future Group’.

In legal terms, privileged legal advice often refers to the communication between a lawyer and the client that can include advice on rights among other things. Such communication is often confidential and is not subject to disclosure or discovery.

"The directions by the ED asking for disclosure of legally privileged documents and litigation privilege information is derogatory of the principles," Reuters reported Amazon as stating in its court filing.

Amazon termed ED’s investigation a ‘fishing and roving’ exercise.

The Enforcement Directorate had also summoned several heads of Amazon India in November over the investigation. For this, Amazon said that it was an ‘unnecessary harassment' meted out to the executives by the ED.

Moreover, Amazon also sought the Delhi High Court’s advice on why ED is ‘expanding its scope and powers’ in the investigation.

Reuters further reported that ED’s notice to Amazon dated February 19, 2021, showed that its investigation was far wider that just the investment case. ED is reportedly looking into allegations that Amazon favoured a small group of sellers on its platform by giving them discounted fees.

HOW ARE RELIANCE AND THE AMBANIS INVOLVED?

The company which wanted to buy out the Future Group was none other than Mukesh Ambani’s Reliance Retail. The firm wanted to buy the Future Group for Rs 24,500 crore and Amazon blocked this by using its stake.

The contents of Amazon’s lawsuit against ED are not public yet.

Writer

Amrutha Pagad Amrutha Pagad @amrutha_pagad

Amrutha loves writing on Humour, Politics, Environment and Gender. She is a Senior Sub editor at DailyO.

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