Why Amazon Is Confronting the Richest Man in India

Indian officials have kept silent about Amazon’s fight with Reliance, but they have pressured the American company on other fronts. The Reserve Bank of India and the Enforcement Directorate, India’s federal crime-fighting agency, are investigating Amazon for suspected violations of India’s foreign investment laws. Amazon and Walmart’s Flipkart are also fighting a legal battle to stop the Competition Commission of India, the country’s antitrust regulator, from pursuing a formal investigation into their sales practices.

In a statement, Amazon said that company officials “take compliance with all applicable laws and policies seriously” and that it was trying to protect its rights in trying to stop the Reliance-Future Group deal. “We are disappointed by the motivated attempts to influence the F.D.I. policy with the view to create an unlevel playing field,” the statement said, referring to India’s restrictions on foreign direct investment.

Neither Reliance nor the Future Group responded to emails requesting comment.

In 2018, the Indian government enacted a law that said foreign-owned e-commerce companies could work only as neutral marketplaces where independent sellers placed their products. The government said the limits would protect small businesses by limiting the ability of platforms like Amazon to sell their own products. Strictly following the law would have meant, for instance, that Amazon could not sell its popular Echo device on its own service.

The Indian government isn’t alone in its concerns over Amazon’s potentially dominant market power. Officials and lawmakers in the United States and Europe have taken an increasingly dim view of Amazon’s ability to use its data to develop and sell its own products. Still, the law was widely interpreted as beneficial to Mr. Ambani’s foray into e-commerce.

“India’s foreign investment laws in retail didn’t make sense in the mid-2000s, when they were enacted, and they don’t make any sense today,” said Arvind Singhal, chairman and managing director of Technopak Advisors, a management consultancy that focuses on retail and consumer products. “The laws are protecting local big players in the name of protecting mom and pop stores.”

Against that environment, Amazon moved cautiously to make a deal with the Future Group. The Indian company was heavily in debt when they struck their pact in 2019. The agreement was structured to comply with tough laws already on the books about foreign companies investing in retail.

The Future Group deal amounted to an option by the American company to expand into brick-and-mortar stores in India should New Delhi ease its retail laws. It also allowed Amazon to use Future’s network of stores as centers for quickly dispatching fresh fruits and vegetables to customers ordering provisions online. Before the dispute between the companies broke out, customers could order vegetables from Big Bazaar stores from the Amazon app.