The Enforcement Directorate (ED), India’s financial crime agency, has conducted searches at the offices of various sellers associated with Amazon and Flipkart, both under scrutiny for alleged breaches of foreign investment regulations, according to two government officials on Thursday.
The raids follow a recent report by Reuters indicating that India’s antitrust body has accused the two companies and their sellers of violating competition laws by favoring certain sellers on their platforms. Both Amazon and Flipkart maintain that they operate within the legal framework of India.
According to one senior government source, searches were executed in major cities, including New Delhi, Mumbai, and Bengaluru, although specific names of the sellers involved were not disclosed.
“The ED’s operation targeting sellers for Amazon and Flipkart is part of its ongoing investigation into potential violations of foreign exchange regulations,” stated the first official with knowledge of the situation.
Both Amazon and Flipkart have yet to respond to inquiries regarding these developments. A spokesperson for the financial crime agency did not provide immediate comments when reached.
This development represents another challenge for Amazon and Flipkart, which view India as a crucial growth market characterized by rapidly increasing e-commerce sales.
For several years, the ED has been examining the practices of both e-commerce giants, alleging that they have circumvented foreign investment laws that are designed to strictly regulate multi-brand retail and restrict their operations to those of a marketplace for sellers.
The first government source noted that the recent searches were informed by the observations from the antitrust agency’s investigation, which was concluded recently.
Reports from the antitrust investigation, conducted in August and viewed by Reuters, claim that the platforms exercised “end-to-end control over the inventory, with sellers merely serving as name-lending enterprises.”
A Reuters investigation in 2021, based on internal documents from Amazon, revealed that the company had significant control over the inventory of several top sellers, despite legal limitations preventing foreign entities from holding such inventory.
In a public remarks in August, India’s commerce minister criticized Amazon, alleging that its investments in the country have often been utilized to cover financial losses, alluding to practices that suggest predatory pricing.
© Thomson Reuters 2024
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