India’s Enforcement Directorate (ED) plans to summon senior executives of Walmart-owned Flipkart and Amazon over alleged violations of foreign investment laws following recent raids on multiple sellers linked to the two companies.
This development comes only weeks after the Competition Commission of India (CCI) accused Amazon and Flipkart of antitrust violations. CCI alleges that both platforms entered into exclusive deals for phone launches with Samsung, Xiaomi, Motorola, Realme, OnePlus, Vivo, and Lenovo.
Indian law prohibits foreign e-commerce companies from holding inventory directly. Instead, they are required to maintain a marketplace structure where third-party sellers list products.
However, the ED has long suspected that Amazon and Flipkart exert control over inventory via arrangements with certain sellers, effectively allowing them a hand in managing stock — a move that could skirt the marketplace mandate.
The ED raided sellers connected to both e-commerce firms last week, seizing documents and scrutinising financial records, Reuters reports. The operation, which extended several days, reportedly provided substantial evidence of violations of foreign investment law.
Appario, formerly one of Amazon’s primary sellers in India, was among the entities raided. Internal documents reveal that Amazon had a special relationship with Appario. This allowed Appario preferential access to resources like discounted fees and advanced inventory tools.
Critics argue that this level of favouritism could disadvantage smaller sellers and disrupt India’s efforts to promote fair business practices.
In addition to reviewing seized documents, ED officials are set to analyse financial data from sellers’ transactions with Flipkart and Amazon over the last five years. The goal is to determine whether these e-commerce platforms indeed maintain ‘end-to-end control’ over inventory and business processes in contravention of local laws.
This move also signals a growing friction between India’s regulatory framework and e-commerce companies. Last week, CCI investigated food delivery platforms Zomato and Swiggy for anti-competitive practices.
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