Government to Probe Amazon and Flipkart on Alleged Foreign Investment Rule Violations

The government is preparing to summon Amazon and Flipkart officials as part of an ongoing investigation into alleged violations of foreign investment regulations. According to sources cited by Reuters, this step is expected following recent Enforcement Directorate (ED) raids on select sellers linked with these companies. The raids raised concerns over possible inventory control by specific preferred sellers.

Last week, the ED conducted a raid on sellers associated with Amazon and Flipkart, reportedly finding evidence supporting foreign investment rule breaches. As a result, the ED plans to call on company officials for questioning while continuing to scrutinize documents obtained during the raid.

The investigation will extend over the last five years, analyzing seller business data and communications with the e-commerce platforms.

Foreign E-Commerce Platforms Can Only Operate as Marketplaces in India

Under Indian regulations, foreign e-commerce companies are not permitted to maintain their own inventory in India; they must strictly operate as online marketplaces. Amazon and Flipkart have seen rapid growth in India’s $70 billion e-commerce market. In 2022, data from Datam Intelligence shows Flipkart held a 32% market share while Amazon accounted for 24%, indicating substantial stakes in the Indian e-commerce landscape.