ED raids multiple locations of top Amazon and Flipkart vendors over alleged FEMA violations: Report
New Delhi: The Enforcement Directorate (ED) carried out multiple searches on Thursday under the Foreign Exchange Management Act (FEMA) at 19 locations in Delhi, Bengaluru, Mumbai, Hyderabad, and Panchkula (Haryana), targetting key vendors of Amazon and Flipkart, Reuters reported.
In an official statement, the central agency confirmed that its FEMA investigation stemmed from numerous complaints filed against Amazon and Flipkart.
According to the ED, these e-commerce companies, which operate as marketplaces, are allegedly breaching Foreign Direct Investment (FDI) rules by directly or indirectly influencing the sale prices of goods or services, thereby failing to ensure a level playing field for all vendors.
An Indian antitrust investigation found that Amazon and Flipkart had violated country’s competition laws by favouring certain sellers on their platforms.
Both Amazon, the U.S.-based e-commerce giant, and Walmart-owned Flipkart have denied these allegations.
In reports dated August 9, the Competition Committee of India (CCI) released findings on Amazon and Flipkart, with reports covering 1,027 pages for Amazon and 1,696 pages for Flipkart.
The investigation concluded that the two platforms had established an ecosystem where preferred sellers ranked higher in search results, disadvantaging other vendors.
The CCI probe, which has not been publicly disclosed but was seen by Reuters, noted that the platforms "had end-to-end control over the inventory and the sellers are just name lending enterprises.”
A 2021 Reuters investigation, based on internal Amazon documents, revealed that Amazon exercised considerable control over the inventory of certain major sellers, despite Indian regulations prohibiting foreign entities from holding product inventory.
The ED has been investigating both Amazon and Flipkart for years over accusations of circumventing foreign investment regulations, which restrict foreign companies from direct multi-brand retail operations, limiting them instead to providing a marketplace for third-party sellers.
A government source informed Reuters on Thursday that the latest searches were based on findings from the antitrust body’s recent investigation into Amazon and Flipkart.
Commerce Minister Piyush Goyal had previously criticized Amazon in August, stating that the company’s investments in India often seem to offset business losses, which he described as "smelling of predatory pricing."
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