The Opinion
Published in

The Opinion

ROFR — The Missed Competition Concern of the Amazon-Future Retail Deal

By Dhriti Mitra

This article primarily explores whether Right of First Refusal (ROFR) clauses are inherently anticompetitive in nature. If it is so, then why has the Amazon — Future Retail deal excluded this Competition concern, and provided Arbitration the center stage in this dispute.

Source: Pix4free

· Introduction
An International Perspective on ROFR Clauses and Competition Law
Amazon v. Future Retail


A Right of First Refusal (ROFR) clause grants a contractual right to a party to be legally entitled to enter into a business transaction before the same can be offered to any other party. Through the course of time, such a clause has been reflective of anticompetitive practices resulting in de facto exclusivity. De facto exclusivity occurs when the ROFR clause obligates its buyer to provide the first offer to the seller in whose favour such a clause has been drafted.

It is pertinent to note that this clause is predominantly imposed on contracts only when there exists some form of business or market advantage that one party holds over the other. Hence, enforcement of such contracts often leads to either an abuse of dominant position or creation of anticompetitive vertical agreements, both of which are recognised contraventions of the antitrust laws of many countries. Resultantly, such a clause restricts competition by enabling market foreclosure and creating trade barriers.

This article analyses the case of enforcement of a ROFR clause in the ongoing dispute between Amazon and Future Retail. To provide a brief background, in 2019, Amazon acquired a 49% stake in Future Coupons which is the promoter firm of Future Retail for a payment of ₹1,431 crore. As a part of this agreement, Amazon was granted a call option or a ROFR when it came to acquiring all or part of Future Retail’s shareholding in the company within a time period of 3–10 years of the agreement. However, in August 2020, the Future Group entered into an agreement with Reliance Industries Limited (RIL) to sell its retail, logistics and warehousing for ₹24,713 crore. Amazon contested this new development on the ground that it was in violation of the ROFR that existed in the agreement between itself and the Future Group.

The above factual premise brings to light the question of whether Amazon has a contractual right of ROFR in the very first place. To arrive at an answer, it is essential to primarily understand whether such clauses are inherently anti-competitive in nature, and if so, why the aforementioned matter is currently revolving around arbitration when the underlying concern evidently requires the attention of the competition authorities.

An International Perspective on ROFR Clauses and Competition Law

To derive a better understanding of whether ROFR clauses are anticompetitive or not, it is important to examine the approach taken by international organizations, courts and regulatory bodies of various jurisdictions.

In 2008, the United Nations Conference on Trade and Development (UNCTAD) released a report on the effects of anti-competitive business practices on developing countries. In this report, the poultry sector in Zambia was analysed and concluded that the ROFR clauses imposed by a dominant poultry producer in that state were in direct violation of Section 7 of the Competition and Fair-Trading Act. Furthermore, the report observed that as a result of the subsequent intervention by competition authorities, the poultry industry became more competitive, and also saw an increase in the number of market players. This is an illustration of how the elimination of ROFR clauses has

assisted in the promotion of market competition.

On the other hand, there are cases where ROFR clauses have been decided to not amount to a loss of competition. The determination of the same is often based solely on the facts and circumstances of a particular case. For example, in the case of T- Mobile UK Limited, the European Commission was initially of the opinion that the existence of a ROFR clause in the concerned site-sharing agreement would amount to de facto exclusivity, and foreclose other operators from the market. However, the ratio of the case quantified that the ROFR clause would not lead to widespread foreclosure, as there was no lack of availability of sites in the UK.

A similar instance is seen in the Indian case of re Saint Gobain Glass India Ltd. and Gujarat Gas Company Ltd. In this case, the Competition Commission of India (CCI) was of the belief that a ROFR clause would lead to a prima facie violation of the provisions of the Competition Act, 2002. However, it was held that as the entity itself was not dominant in the relevant market, there was no such violation.

In countries such as the USA, the practice of inclusion of ROFR clauses by incumbent players is well established. Nevertheless, this practice too has recently come under legal scrutiny. For example, in the 2016 case of Oklahoma Gas & Elec. Co. v. FERC, the Court of Appeals found that the ROFR clauses in the concerned agreement were restricting rival transmission providers from entering the market, and also acting as a deterrent to infrastructure reform. In another case before the Supreme Court of the United States, a writ petition was filed alleging that ROFRs granted to incumbent electricity monopolists under the Minnesota statute, is in violation of the dormant commerce clause. Although this petition was later dismissed, it addresses the market concerns with respect to the legality of ROFRs.
In terms of regulatory actions adopted internationally, the Financial Conduct Authority (FCA) which is responsible for the functioning of the U.K.’s financial markets and the promotion of healthy competition among financial service providers, became the first regulatory body to ban firms from entering into written agreements that include a ROFR or right to act provision. This ban extends to the supply of future primary equity or debt capital market or M&A services to clients. Whether other regulatory bodies will follow suit is yet to be seen.

In summation, an adjudication on the issue of anti-competitiveness of ROFR clauses in the international arena is based on the satisfaction of two conditions; first, assessment of the dominance of an entity, and second, evaluation of any possible adverse effects on market competition owing to the ROFR clause imposed by the said dominant entity.

Amazon v. Future Retail

In November 2020, CCI approved the deal between Future Group and RIL, as it did not find any horizontal or vertical overlaps that would foreclose competition leading to an appreciable adverse effect on competition. However, from a look at the order, it is discernible that a distinction was drawn between the online and offline market segments to conclude that the deal between RIL and Future Group shall not lead to dominance in the relevant market. Further, there was no fitting discussion on the prior existence of ROFRs or non-compete clauses.

Consequently, Amazon chose to implement the ROFR by approaching the Singapore International Arbitration Centre, where an interim order was passed by an emergency arbitrator in Amazon’s favour. This was followed by Amazon’s plea for the enforcement of the award before the Delhi High Court, and a single judge bench directed Future Retail to maintain status quo on the Reliance deal. However, the same order was later stayed by a division bench of the Delhi High Court.

Photo by Christian Wiediger on Unsplash

After two more orders from the Delhi High Court and an appeal by Amazon before the Supreme Court of India, a tug of war continues to ensue between Amazon and Future Retail. Nonetheless, the competition concern surrounding the ROFR clause that is ostensibly leading to de facto exclusivity and restricting competition, remains unnoticed. Amazon operates in the same B2B market segment where CCI has approved the combination between Future group and RIL. Therefore, whether or not Amazon is a dominant entity under Section 4 of the Competition Act 2002, is relevant to understand the exact effect of the ROFR clause. If Amazon is decided to be dominant, then it is important to analyse whether it has abused such dominance by including the ROFR clause, in turn leading to an appreciable adverse effect on the prevailing competition in the market.

On the other hand, if Future Retail decides to contest the validity of the ROFR clause and questions its anticompetitive effects on competition, it would open the doors for debate upon whether competition matters are arbitrable in India, and if not, then which law shall prevail over the other.

In the Indian case of Union of India v. Competition Commission of India, the CCI’s jurisdiction was questioned due to the existence of an arbitration clause. However, the ratio of the case stated that since the scope and focus of the investigation conducted by CCI and arbitration tribunals are different, CCI was allowed to move forward with its proceedings and the arbitration tribunal was excluded from the same. Today, in the international context, in both the EU and the US, the arbitrability of competition law is broadly acceptable. Therefore, it is time that India adopts a more liberal approach to land a solution to the aforementioned problem.


The Indian retail market is estimated to reach approximate of $1 trillion by 2025. As both Amazon and RIL have a stake in this market, and Future Retail wishes to relieve itself of its accumulated debt, this dispute will influence the determination of the face of the B2B market segment in India. Furthermore, with arbitration being the adopted approach, the issue regarding India’s adherence to international best practices in arbitration has taken the centre stage in this dispute. While Amazon did not approach the competition authorities due to a multitude of cases that it is already facing or has recently faced before the CCI, Future Retail to its own detriment has turned a blind eye to the existing competition concern.




The Opinion is a publication based on Medium. We publish short articles on social and legal subjects, providing an opportunity to the early writers who face trouble in finding people who can review, enhance, publish, and promote their pieces.

Recommended from Medium

Our common future got a little bit dimmer. For tech, it got a lot brighter

Top 10 Best IT Consulting Firms for Strategy Consulting in 2021

IT Consulting

People Counter Systems — What, When, Why?

Strategies for Sustainability in Uncertain Times

How I’d Approach General Assembly Again as a VC: 9 Key Lessons

Trending News: Growing Industrialization In Emerging Economies Is Driving The Demand For Synthetic…

Disrupt vs. Disturb

Disruption happens and changes the course of human advancement.

Connected Aircraft Market is estimated to reach USD 9.5 Billion by 2024 at a CAGR of 16.2%.

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
The Opinion

The Opinion

More from Medium

2021 was a firework…

Meet the Members of the FemTech Association of Asia

Why You Could Use a Company Retreat

Two Heads Are Better Than One