In a significant development, India’s financial crime agency has launched a series of raids on the offices of select sellers operating through Amazon and Flipkart. The operation, which spans across New Delhi, Mumbai, and Bengaluru, is part of an ongoing investigation into suspected violations of foreign investment regulations, according to multiple government sources.
The raids follow recent findings by India’s antitrust body, which revealed that both Amazon and Flipkart have allegedly breached competition laws. The two e-commerce giants, alongside their sellers, are accused of prioritizing certain vendors on their platforms in violation of fair trading standards. Despite these claims, both Amazon and Flipkart assert that they comply with Indian regulations.
These actions mark a new chapter in the long-standing scrutiny of Amazon and Flipkart’s business practices in India, particularly regarding their adherence to foreign investment laws. Under these regulations, foreign companies are restricted from holding inventory and must operate strictly as marketplace platforms for independent sellers. However, a Reuters investigation in 2021 uncovered evidence suggesting Amazon had significant influence over the inventory of top sellers, raising questions about its compliance with these rules.
The Enforcement Directorate’s probe into the two companies has intensified following the recent antitrust investigation, which allegedly uncovered evidence that Amazon and Flipkart exert “end-to-end control” over inventory, with sellers operating more as mere facilitators. The investigations have fueled concerns that foreign investments may be circumventing laws intended to protect local businesses.
This latest round of raids adds to the growing challenges Amazon and Flipkart face in India, a crucial market for their expansion in Asia. With e-commerce sales skyrocketing, the companies now find themselves under intense scrutiny as regulators tighten their grip on foreign investment in the retail sector.
