Enforcement Directorate raids Amazon, Flipkart sellers amid foreign investment law probe

India's Enforcement Directorate (ED) has conducted raids on the offices of certain sellers operating on Amazon and Flipkart's platforms. According to a report by Reuters, the investigation concerns alleged breaches of foreign investment laws by these e-commerce giants, citing government sources. These actions add to the regulatory challenges Amazon and Flipkart, which is majority-owned by Walmart, have faced in India over the years.

The ED's raids, carried out in New Delhi, Mumbai, and Bengaluru, target sellers associated with Amazon and Flipkart who are suspected of violating foreign exchange laws, the report suggests. This follows a recent report by India's antitrust regulator, which found that both companies appeared to give preferential treatment to select sellers, potentially undermining competition. Indian law prohibits foreign e-commerce companies from holding inventory and mandates that they only provide a platform for independent sellers.

The report cites a senior government official, who did not disclose the specific sellers being targeted, confirmed that the ED is investigating whether these e-commerce players have breached foreign exchange regulations by maintaining close control over certain sellers' inventory.

For years, local brick-and-mortar retailers have accused Amazon and Flipkart of sidestepping investment rules by working closely with a few preferred sellers. Critics argue that this arrangement gives the companies indirect control over product inventories, disadvantaging smaller retailers. A 2021 investigation found that Amazon held significant influence over the inventory and pricing of certain major sellers on its Indian platform. Both companies, however, assert that they are fully compliant with Indian regulations.

As of now, Amazon and Flipkart have not issued statements regarding the raids. Additionally, the Enforcement Directorate has not provided further comments on the specifics of the investigation.