ED Said to Summon Amazon, Flipkart Executives as Regulatory Scrutiny Grows

Amazon and Flipkart have maintained they comply with Indian laws.

By Reuters | Updated: 11 November 2024 15:06 IST

ED Said to Summon Amazon, Flipkart Executives as Regulatory Scrutiny Grows

Photo Credit: Reuters

The ED has been investigating Amazon, Flipkart for years

Highlights

ED steps up an investigation into alleged foreign investment law breaches
Foreign e-commerce players have to operate as a marketplace of sellers
ED's searches on Amazon, Flipkart went on until Saturday

India's financial crime agency will summon Flipkart and Amazon executives as it steps up an investigation into alleged foreign investment law violations, days after raiding some of the e-commerce firms' sellers, a senior government source said.

The planned action signals growing regulatory scrutiny of Walmart-owned Flipkart and Amazon when their sales are rapidly growing in India's $70 billion (roughly Rs. 5,93,614 crore) e-commerce market. An Indian antitrust investigation also found the two companies breached laws by favouring select sellers, Reuters has reported.

Amazon and Flipkart have maintained they comply with Indian laws, but the Enforcement Directorate has for years been investigating allegations the companies, through select sellers, exert control over inventory of goods.

ED Said to Have Raided Offices of Sellers on Amazon, Flipkart

Indian laws prohibit foreign e-commerce players from holding inventory of goods they can sell on their website, forcing them to only operate a marketplace of sellers.

After last week's raids by the Directorate on Amazon and Flipkart sellers, the federal agency now plans to summon the company executives, and is currently reviewing documents seized from the sellers during the operation, a senior government source directly involved in the case said on Monday.

The searches went on until Saturday and have substantiated there were foreign investment rule violations, said the government source, who declined to be named as details of the raids have not been disclosed publicly.

Online Sellers on Flipkart Sue CCI Over Antitrust Probe

The Directorate will also analyse business data from sellers and their dealings with the e-commerce companies in at least the last five years, the official added.

Amazon, Flipkart and the Enforcement Directorate, did not immediately respond to Reuters' queries.

End-to-End Control

Datum Intelligence estimates Flipkart had a 32 percent market share and Amazon a 24 percent share last year in Indian e-commerce, which roughly accounts for eight percent of the $834 billion (roughly Rs. 70,37,303 crore) retail sector.

The latest raids were triggered by Amazon and Flipkart antitrust investigation findings that said the platforms "had end-to-end control over the inventory and the sellers are just name lending enterprises."

Two other sources with direct knowledge of the matter said at least two of Amazon's sellers and four of Flipkart's sellers were raided last week.

A Reuters investigation in 2021, based on internal Amazon papers, showed the company exerted significant control over the inventory of some of the biggest sellers, even though Indian laws prohibit foreign players from doing so.

One of the sources said on Monday that Appario, once Amazon's biggest Indian seller, was among those raided last week, when officials inspected financial books and questioned executives about their dealings with the US-based e-commerce giant.

Appario was internally referred to as a "special" merchant and received discounted fees and access to Amazon global retail tools used for things like inventory management, unlike other sellers, the Reuters investigation in 2021 found.

Appario did not respond to a request for comment.

Online shopping and delivery platforms face growing scrutiny in India due to complaints of unfair business practices that hurt smaller players. Reuters reported last week the antitrust body also found food delivery giants Zomato and Swiggy breached laws as they favoured select restaurants on their apps.

(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)

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