Flipkart and Amazon will be summoned by the government for violating foreign investment law

News Mania Desk / Piyal Chatterjee / 11th November 2024

According to a media outlet, the government will call in officials from Flipkart and Amazon as part of a stepped-up inquiry into possible violations of foreign investment restrictions. A senior government source claims that this action comes after recent raids on some of the vendors connected to these e-commerce behemoths. The move highlights the growing regulatory scrutiny of Amazon and Flipkart, both owned by Walmart, whose sales are rising quickly in India’s $70 billion e-commerce business. According to Reuters, an antitrust probe in India has already determined that both businesses violated the law by giving preference to certain dealers.

Flipkart and Amazon have continuously insisted that they abide by Indian law. But for years, the Enforcement Directorate has been looking into claims that the corporations control the inventory of items through specific dealers. Indian laws require international e-commerce companies to function only as a marketplace for sellers and forbid them from keeping inventory. A senior government source engaged in the inquiry said Monday that the federal agency is presently evaluating documents collected during the raids on Amazon and Flipkart vendors last week and intends to summon corporate leaders.

The official source, who asked to remain anonymous because the raid details were private, said the searches, which lasted till Saturday, verified infractions of foreign investment regulations. According to the official, the Directorate will also look at the sellers’ business information and their dealings with the e-commerce firms throughout the previous five years.

In the Indian e-commerce business last year, Flipkart had a 32% market share and Amazon had a 24% market share, accounting for around 8% of the $834 billion retail market, according to Datum Intelligence. The current raids came after antitrust findings showed that both platforms had “end-to-end control over the inventory, with sellers merely acting as name-lending entities.” At least two Amazon vendors and four Flipkart merchants were raided last week, according to people familiar with the situation.

Despite Indian rules that forbid foreign players from engaging in such methods, an examination conducted in 2021 using internal Amazon documents found that the corporation retained considerable control over the inventory of some of its biggest sellers. Appario, the former biggest Indian seller on Amazon, was one among those raided last week, according to a source on Monday. Officials questioned executives about their interactions with the U.S.-based e-commerce behemoth and reviewed financial data. According to the Reuters investigation in 2021, Appario was referred to internally as a “special” merchant, earning discounted fees and access to Amazon’s worldwide retail capabilities for inventory management, in contrast to other sellers. A request for comment from Appario was not answered.

In India, concerns of unethical business practices hurting smaller competitors have led to increased scrutiny of online shopping and delivery platforms. According to a outlet from last week, the antitrust agency also discovered that Zomato and Swiggy, two of the biggest meal delivery services, had broken the law by giving preference to certain restaurants on their platforms.