The Enforcement Directorate (ED) has uncovered “direct links” between e-commerce giants Amazon and Flipkart and their preferred sellers, The Economic Times reported on Tuesday. The central probe agency is investigating alleged violations of foreign investment laws by the companies.
According to the report, the ED quizzed the “top” five sellers of both firms and found that many of these sellers are either former employees or relatives of former associates of Amazon and Flipkart.
ED conducts raids on Amazon, Flipkart sellers
This development comes a week after the ED conducted raids at several of the e-commerce firms’ sellers, signalling growing regulatory scrutiny. These raids were carried out at 19 different locations in New Delhi, Mumbai, and Bengaluru.
Amazon and Walmart-owned Flipkart have rapidly solidified their presence in India, with sales booming in the country’s $70 billion e-commerce market.
The allegations of favouring select sellers constitute a breach of the Foreign Exchange Management Act (FEMA). While both Flipkart and Amazon maintain compliance with Indian laws, the ED has been investigating claims that the giants exert control over inventory through these sellers.
Piyush Goyal’s criticism of Amazon
Under Indian laws, foreign e-commerce players are prohibited from holding inventory and must operate solely as marketplaces.
In August, Union Minister Piyush Goyal publicly criticised Amazon, stating that the company’s losses in India “smell of predatory pricing.” The commerce minister questioned Amazon’s $1 billion investment announcement for India, arguing that it was not benefiting the Indian economy but compensating for its losses.
Goyal further noted that such practices negatively impact millions of small retailers, calling it a troubling indicator for the economy.