India’s Financial Crime Agency Raids Amazon and Flipkart Seller Offices Amid Foreign Investment Probe

In a significant escalation of ongoing tensions, India’s Enforcement Directorate (ED) has conducted high-profile raids on the offices of several sellers operating on Amazon and Walmart-owned Flipkart. The raids, which were carried out in New Delhi, Mumbai, and Bengaluruare part of an investigation into alleged violations of foreign investment lawsaccording to two senior government sources. This marks the latest chapter in the mounting scrutiny faced by the e-commerce giants in one of their largest growth markets.

A Long-Running Investigation Intensifies

The ED’s current probe focuses on whether Amazon and Flipkart have sidestepped foreign exchange regulations that govern multi-brand retail in India. These laws, designed to protect local businesses, limit foreign players like Amazon and Flipkart to operating as neutral marketplaces, prohibiting direct control over sellers’ inventory. Yet, reports from India’s antitrust body, as well as past investigations, indicate the companies have allegedly bypassed these restrictions by granting preferential treatment to certain sellers.

One source directly involved in the investigation revealed that the ED’s actions are grounded in recent findings by India’s antitrust authority, which noted that both platforms had an “end-to-end control over the inventory,” with sellers acting as “name lending enterprises.”

A Pattern of Allegations

This isn’t the first time Amazon and Flipkart have faced allegations of rule-breaking in India. In 2021, a Reuters investigation cited internal Amazon documents that detailed the company’s extensive influence over the stock and pricing of certain top sellers, a practice that critics argue is tantamount to bypassing Indian laws. Despite these claims, both Amazon and Flipkart have repeatedly asserted their compliance with Indian regulations.

The Commerce Ministry’s stance on foreign e-commerce has only grown more resolute in recent years. In August, India’s Commerce Minister accused Amazon of masking losses through strategic investments, describing its practices as suggestive of predatory pricinga tactic used to undercut local competitors.

A Critical Market on the Line

India is an indispensable market for Amazon and Flipkart. Despite the regulatory obstacles, both companies have invested billions of dollars to capture a share of India’s rapidly expanding e-commerce sector, which is projected to grow even further in the coming years. However, these investigations are a stark reminder of the complexities that foreign e-commerce platforms face in India’s highly regulated retail landscape.

Neither Amazon nor Flipkart responded immediately to requests for comment on the raids. A representative from the ED similarly declined to provide further details at this stage. For Amazon and Flipkart, the stakes are high—continued scrutiny could reshape their strategies in India or even threaten their very business models in one of the world’s fastest-growing e-commerce markets.

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