[BANGALORE] Amazon.com said its Indian partner Future Group violated a contract by entering into a US$3.4 billion sale agreement with billionaire Mukesh Ambani's Reliance Industries, a spat that could derail the country's biggest retail deal.

"We have initiated steps to enforce our contractual rights," a spokesperson for the Seattle-based e-commerce giant said. "As the matter is sub-judice, we can't provide details."

A representative for Future Group didn't immediately respond to a request for comment.

Amazon agreed to purchase 49 per cent of one of Future's unlisted firms last year, with the right to buy into flagship Future Retail after a period of between three and 10 years. But about two months ago, rival Reliance announced it would buy the retail, wholesale, logistics and warehousing units of the indebted Future Group, almost doubling its footprint as India's largest retailer.

Amazon "certainly would've incorporated a strong non-compete and first right of refusal," said Arvind Singhal, chairman of retail consultancy Technopak Advisors. "Looks like that clause has been breached."

With the dispute, Amazon is drawing the battle lines with Reliance in the race for India's estimated US$1 trillion retail market, where online shopping is gaining ground. For Amazon, the Indian partner was crucial to strengthening its foothold after becoming the authorised online sales channel for Future Retail's stores that sell everything from groceries to cosmetics and apparel.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

The war for a slice of the emerging market is reshaping India's retail landscape, with Reliance, Amazon and Walmart looking to dominate the field. Mr Ambani has just raised more than US$5 billion selling stakes in Reliance Retail Ventures to private equity firms and sovereign funds. The tycoon was offering a roughly US$20 billion stake in his own retail business to Amazon, a person with knowledge of the matter said last month. Tata Group, the US$113 billion conglomerate, is also preparing to enter the fray.

"Amazon's action causes a roadblock to Reliance Retail," Mr Singhal said. "Why would they not want to? It's fair game since that's exactly what Reliance would do."

NASCENT MARKET

Amazon founder Jeff Bezos has made the nascent Indian market, with its 1.3 billion consumers, a key focus of its global expansion. He has already pledged to invest US$6.5 billion in the country. He's also facing competition from Walmart, which spent US$16 billion in 2018 to acquire local e-commerce leader Flipkart Online Services and has further invested over US$1 billion this year in the entity after selling its India operations to the e-retailer.

The deal between Reliance and Future, announced late August, is awaiting regulatory approvals. A spokesman for Reliance declined to comment. ET Now television channel earlier reported that Amazon has sent a legal notice to Future.

BLOOMBERG