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

“We have initiated steps to enforce our contractual rights,” a spokeswoman for the Seattle-based e-commerce giant said in an email. “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% of one of Future’s unlisted firms last year, with the right to buy into flagship Future Retail Ltd. 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 $1 trillion retail market, where online shopping is gaining ground. For Amazon, the Indian partner was crucial to strengthening its foothold after becoming the authorized online sales channel for Future Retail’s stores that sell everything from groceries to cosmetics and apparel.

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

“Amazon’s action causes a roadblock to Reliance Retail,” 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 $6.5 billion in the country. He’s also facing competition from Walmart, which spent $16 billion in 2018 to acquire local e-commerce leader Flipkart Online Services Pvt. and has further invested over $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.