Amazon and Flipkart executives face ED probe over alleged FEMA violations in India

Top executives of e-commerce giants Amazon and Flipkart are under the scanner of the Enforcement Directorate (ED) over alleged violations of foreign investment regulations, sources have told India Today. The probe agency is expected to summon key executives after completing the initial phase of investigations into their alleged role in breaching the Foreign Exchange Management Act (FEMA).

The development follows extensive searches conducted by the ED at over 19 locations associated with vendors of Amazon and Flipkart across Delhi, Bengaluru, Mumbai, Hyderabad, and Panchkula (Haryana). These searches, carried out under FEMA provisions, aimed to uncover potential evidence of irregularities.

The ED’s investigation stems from multiple complaints alleging that Amazon and Flipkart have been violating foreign direct investment (FDI) rules by directly or indirectly favoring select vendors, thereby distorting market competition. The complainants argue that such practices undermine a level playing field for other vendors on these platforms, contrary to India’s FDI guidelines.

Sources close to the investigation revealed that some of the favored vendors allegedly have direct links to senior executives of Amazon and Flipkart. These vendors are said to have received “deliberate advantages,” further raising suspicions of unfair practices.

The complaints against the e-commerce giants have raised concerns that both companies may be influencing the sale of goods or services through preferential treatment of specific sellers. Such practices, if proven, would contravene India’s FDI regulations, which bar e-commerce platforms from holding inventory or controlling sellers’ operations.

The ED’s probe into Amazon and Flipkart is part of a broader crackdown on foreign e-commerce companies operating in India. Over the past few years, domestic traders and organizations have frequently alleged that foreign e-commerce platforms misuse their dominant positions to manipulate the market in favor of select players, sidelining smaller sellers.

Both Amazon and Flipkart are yet to issue any detailed statements on the recent developments.

According to sources, the ED is likely to issue summons to key individuals from both companies once it consolidates its findings from the searches and preliminary investigation. The probe agency is expected to examine the executives’ role in devising or endorsing business practices that may contravene FEMA and FDI rules.

The outcome of the investigation could have far-reaching implications for the operations of foreign e-commerce companies in India, particularly regarding compliance with regulatory norms designed to protect the interests of local businesses.