Future of Reliance in Retail: Analysing Competition Concerns

by Sampurna Kanungo and Sanjana Bhasin, fifth year students at NMIMS Kirit P. Mehta School of Law, Mumbai

The recent acquisition of the retail, wholesale, warehousing and logistics undertaking of the Future Group by Reliance Retail Ventures Limited (“Reliance-Future acquisition”) has caused a wave in the market as it is a combination of two key market players in the organised retail segment. Post the acquisition, Reliance would be poised to pose a formidable threat to rivals and local players within the market along with the elimination of a key competitor. Under these circumstances, an investigation into the combination is warranted to ensure that the combination does not cause an appreciable adverse effect on competition in the relevant market.

The proposed combination has been notified to the Competition Commission of India (‘CCI’) as per the statutory obligation imposed under Section 6(2) of the Competition Act, 2002. In the present deal, the parties to the acquisition have submitted that the relevant markets are (a) market for retail in India; and (b) market for B2B sales in India. In this article, the authors break down the decisional practice of the CCI to determine the extent to which such an assessment holds ground and analyse the treatment conferred upon unique aspects of the acquisition as well as explore the possibility of abuse of dominant position.

  1. Delineation of Relevant Market

While assessing a combination, the foremost step is to delineate a “relevant market”. The market for retail sales in India is extremely fragmented and comprises of several smaller spheres such as the divide between online and offline segments, organised and unorganised markets etc., each of which are capable of constituting a separate market by itself. Further, a closer look at the parties to the transaction indicates that both have businesses that are spread out across the online/offline retail spectrum.

a. Online/ Offline modes of distribution as a separate relevant market

While considering the demarcation between online and offline retail markets, the decisional practice of the CCI, such as in the case of Ashish Ahuja V. Snapdeal,  has been to regard it as merely two modes of distribution of the same product and not two different relevant markets. Similarly, in the case of Jasper Infotech (Snapdeal) V. Kaff Appliances, the CCI considered the overall market share in the broader market of “supply and distribution of kitchen appliances in India” rather than assessing the market shares individually in the online and offline space.

Interestingly, it is pertinent to note that post 2014, there has been a shift in the outlook of the CCI towards the treatment of online and offline markets. In the case of All India Online Vendors Association v. Flipkart India private limited, the relevant market was exclusively considered as “services provided by online marketplaces for selling of goods in India”, thus highlighting the online retail market as a separate relevant market altogether. The CCI has also acknowledged the growing importance of online commerce in its Market Study on E-Commerce, which highlights the limitation of a unified retail market as a whole on account of the nature of the goods and extent of price differential between sales channels and accordingly calls for a product specific assessment of markets. 

Thus, the conception of retail sales as a broader relevant market as submitted by the parties may not be viable, given the decisional practice of the CCI in recent times. Further, the extent of substitutability between products available for sale via the online and offline modes has also been thrown into question post the COVID pandemic which has acted as a catalyst for the popularity and development of online channels of retail. The CCI has considered factors like ease of choice, convenience etc. for delineating a separate relevant market (of ‘radio cabs service’) in the case of Fast Track Call Cab Pvt. Ltd. V. ANI technologies Pvt. Ltd.,which could further be used to cement the position of online and offline channels of retail as separate relevant markets.

b. Assessment of B2B/B2C sales as overlaps within the relevant market

The other proposed market is the ‘market for B2B sales in India.’ The two common models for retail sales are Business to Business (‘B2B’) and Business to Consumer (‘B2C’). Following previous decisions of the CCI, B2B/ B2C Sales are usually analysed as a horizontal/vertical overlap between the parties and not as a separate relevant market. Overlaps are assessed within the contours of the determined relevant market. An overlap is considered to be horizontal if the parties are close competitors in similar lines of business. On the other hand, a vertical overlap refers to a situation wherein the parties are at different stages of the production chain, such as a combination between a manufacturer and a distributor. A vertical overlap may pose competition concerns since it has the ability to foreclose competition for other distributors.

In case of the Reliance-Future acquisition, not only does Reliance gain a foothold in the B2B segment via the acquisition of the logistics and warehousing segment, it will also continue to operate a B2C business model by way of retail sales to customers through acquisition of physical stores. Since this transaction involves the presence of both business models, it would have to be assessed as a horizontal/vertical overlap within the relevant market.

Illustratively, in Re: Walmart International Holdings, B2B business at the granular level of verticals (i.e. individual goods) was considered while assessing horizontal overlaps. This B2B segment had further been divided into organised and unorganised sectors, even though such a distinction had not been made by the parties. Further, B2C sales were considered under the segment of vertical overlaps. Since Walmart was not engaged in any online marketplace business for B2C sales (on account of such prohibition under the extant FDI Policy), the CCI did not find any vertical overlap.

Thus, the CCI is likely to assess B2B/B2C sales while examining overlaps in the relevant product market.

2. Assessment of Combination

Post the determination of a relevant market, the effect on competition within that market on account of the proposed combination must be assessed. Pursuant to the same, certain unique aspects of the Reliance Future acquisition, such as the nature of the non-compete clause as well as the structure of e-commerce market itself and its implication on the proposed combination, warrant a more detailed examination.

a. Analysing inordinately long Non-Compete Clauses

One of the features of the Reliance-Future acquisition is the inclusion of a non-compete clause as one of the terms of the transaction. As per the Non-Compete Clause, Mr. Kishore Biyani and his family members have been barred from competing in the retail space for 15 years.

The guiding principle for assessment of non-compete clauses is whether the restriction is “ancillary” i.e. directly related and necessary to the implementation of the combination. As a rule of thumb, the CCI has prescribed a period of 3 years in case of transfer of goodwill and know-how and 2 years for transfer of goodwill.

Consequently, while such an inordinately long restriction period is likely to fall under CCI’s scanner, it is unlikely to sound the death knell for the transaction given the regulatory body’s favourable assessment of the same in recent times. CCI has permitted a  longer duration in certain sectors wherein customer loyalty would persist for longer duration. This specific carve out would prove to be beneficial for RRVL in justifying the long duration of the non-compete clause given the expansive loyalty base that has been garnered by Future Group, especially in case of its retail outlets such as Big Bazaar. While the CCI has ordered the reduction of the restriction period under non-compete clauses in numerous cases, a departure from the “ancillary” principle is not considered to be an infringement of the provisions of the Act. Further, the recent stance of the CCI regarding non-compete clauses has been indicative of a more relaxed assessment in view of modern business arrangements,  which can be gauged by a proposal to omit the obligation to disclose details of non-compete clauses.

b. Increase in level of concentration due to network effects

A significant threat to competition within the market is an increase in the level of concentration i.e. the presence of limited key players. A peculiar feature of the functioning of e-commerce platforms is the presence of network effects, which acts as a catalyst in increasing concentration in the market. Network Effect is a phenomenon whereby a product/ service becomes more valuable with the increase in number of users. The importance of e-commerce platforms further increases as growing number of users makes the platform more valuable, which attracts more sellers in return and leads to a ‘positive feedback loop’.

In the present combination, combining both front end and back end services (logistics and warehousing), would make the platform more viable for sellers, which would conversely lead to a larger customer base. This is not only lucrative for emerging platforms such as Jio-Mart which doesn’t have an existing customer base, it can very quickly lead to a concentrated market in this case, especially when combined with the advantages of the existing brand value and loyalty base of the Future Group. Thus, the acquisition of back end services in particular would have the effect of strengthening the network effect of e-commerce platforms of Reliance, and lead to an increase in the level of concentration in the market.

3. Abuse of dominant position

The deal provides massive synergies to Reliance by doubling the retail outlets under operation alongside development of strong back-end and front-end retail businesses, conferring the highest market share to them in the organised retail segment. Key factors such as market share of the enterprise, size and resources of the enterprise and size and importance of the competitors are essential to determine the dominant position of the post-acquisition enterprise.

With Reliance Industries now having access to a strong supply chain and warehousing facility, overlapping with their venture into the online retail space JioMart raises concerns of them abusing their dominant position in one relevant market i.e. offline retail to enter into, or protect, the other relevant market of e-commerce retail. It has been established that the regulator considers not just immediate effects on competition, but also scenarios where the combination may adversely affect competition in the future. Therefore, such vertical integration of the enterprises with large sales and service network puts them in a dominant position, making available the opportunity to indulge in unfair and discriminatory pricing and denying market access to new players in the offline organised retail segment and strengthening their position in the e-commerce retail.


The Reliance-Future acquisition is arguably one of the largest and most significant transactions in recent times, which is likely to have far-reaching consequences in the entire retail space. Consequently, it is imperative to analyse the effects of this combination on the overall level of competition in the market. While an analysis of anti-competitive agreements or abuse of dominance is not conclusive at this preliminary stage, an analysis from a merger control perspective highlights some key aspects. The question of delineating the relevant market has always been one of substantial uncertainty, and the CCI’s decision in this particular combination would be especially significant given that all stages of the production chain as well as different modes would have to be taken into consideration. Moreover, some aspects such as network effects and the ability to leverage position in one market to capture another would have a bearing on a subsequent assessment of dominance as well owing to the plausible increase in market share and concentration.

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