ED Intensifies Probe into Amazon, Flipkart’s Alleged FDI Norm Violations.
In a significant escalation, India’s Enforcement Directorate (ED) is now directly investigating whether e-commerce giants Amazon and Flipkart have breached the country’s Foreign Direct Investment (FDI) regulations through their relationships with vendors.
The probe, which earlier focused on large sellers associated with these platforms, has now shifted its attention to the companies themselves, according to a report by the Economic Times.
The ED’s investigation is linked to alleged violations under the Foreign Exchange Management Act (FEMA), which typically result in monetary penalties. Earlier this month, the agency conducted nationwide searches at 19 sites in New Delhi, Bengaluru, and Hyderabad, targeting prominent sellers on Amazon and Flipkart.
The central focus of the ED’s investigation is to uncover whether Amazon and Flipkart have controlled their vendors in ways that violate the regulations, which mandate that these platforms operate purely as intermediaries and not as inventory-based businesses.
“The ED is scrutinizing whether Amazon and Flipkart controlled vendors in ways that violate regulations, which mandate that these platforms operate purely as intermediaries and not as inventory-based businesses,” said a source familiar with the matter.
While the initial phase of the investigation targeted the large sellers associated with these e-commerce platforms, the second phase will now zero in on Amazon and Flipkart directly. Insiders claim that this issue has been a long-standing concern for authorities, dating back to 2019.
Although the e-commerce giants are yet to be formally summoned, the recent searches were reportedly triggered by new evidence deemed actionable by the ED.
The ED’s investigation is centered on whether the platforms’ influence over vendors has breached FDI regulations, such as the rule that no single seller should account for more than 25% of total sales. Critics suggest that the companies may have skirted these rules despite the stringent guidelines.
The Competition Commission of India (CCI) has also examined whether the companies offer equal opportunities to all vendors or show preference to a select few large sellers. The ED’s investigation, however, is specifically focused on alleged FDI rule violations.
