ED to summon Amazon, Flipkart executives after raids on sellers in India

India’s financial crime agency is reportedly set to summon executives from Flipkart and Amazon as part of an escalating investigation into alleged violations of foreign investment laws. The move follows recent raids on sellers working with the e-commerce giants.

This action marks a further tightening of regulatory scrutiny over Walmart-owned Flipkart and Amazon, whose sales are rapidly expanding within India’s $70 billion e-commerce market. The investigation comes on the heels of an Indian antitrust probe, which found that both companies had breached laws by favouring select sellers on their platforms, Reuters reported.

While both Amazon and Flipkart maintain that they comply with Indian regulations, the Enforcement Directorate has been investigating claims that the companies, through certain sellers, exert control over inventory. Indian laws prohibit foreign e-commerce firms from holding inventory of goods sold on their platforms, restricting them from operating as marketplaces for third-party sellers.

Following last week’s raids on the sellers of Amazon and Flipkart, the Enforcement Directorate plans to summon executives from both companies. Authorities are also reviewing documents seized during the operation. According to reports, the raids, which continued until Saturday, have provided evidence of violations related to foreign investment regulations. The Directorate is now set to analyse business data from sellers and their transactions with the e-commerce platforms, covering at least the past five years.

The raids were prompted by findings from an ongoing antitrust investigation, which uncovered that the e-commerce platforms maintained 'end-to-end control' over their inventory, with sellers acting merely as intermediaries. 

In 2021, a Reuters investigation based on internal Amazon documents revealed the company’s significant influence over the inventory of some of its largest sellers, despite Indian laws prohibiting foreign players from managing inventory directly. The report mentioned that Appario, once Amazon’s biggest seller in India, was among those raided last week. The Enforcement Directorate’s inspection included financial records and interviews with executives regarding their dealings with Amazon. Internal Amazon documents had previously referred to Appario as a 'special' merchant, offering it discounted fees and access to Amazon’s global retail tools, including inventory management, unlike other sellers.

The growing scrutiny of e-commerce and online delivery platforms in India is a response to increasing complaints of unfair business practices that undermine smaller players. Recently, India’s antitrust body also found that food delivery platforms Zomato and Swiggy had violated laws by favouring select restaurants on their apps.