ED raids offices of Flipkart and Amazon sellers across India due to alleged violations of foreign investment rules

The pan-India raid included searches at Amazon and Flipkart seller locations in Delhi, Mumbai, Hyderabad, and Bengaluru.

In Short

• ED raids Amazon and Flipkart sellers for foreign investment rule breaches
• Raids part of probe into alleged competition law violations
• Investigation affects Amazon, Flipkart's growth in India

India’s financial crime agency, the Enforcement Directorate (ED), has conducted raids on sellers associated with Amazon and Walmart-owned Flipkart, targeting alleged violations of the country's foreign investment rules. Reportedly, the pan-India operation included searches at seller locations and Amazon and Flipkart subsidiaries across major cities like Delhi, Mumbai, Hyderabad, and Bengaluru. “The raids on sellers of Amazon and Flipkart is a part of ED’s probe ... for alleged violations of foreign exchange laws," Reuters has quoted a source in the government saying.

This latest probe follows findings from India’s antitrust body, which concluded that both Amazon and Flipkart, along with some of their sellers, violated competition laws by favouring specific sellers. The companies have consistently claimed adherence to Indian regulations, but the ED is now examining if any violations of the Prevention of Money Laundering Act (PMLA) occurred through transactions on these platforms.

One senior official disclosed that the raids are a part of an ongoing investigation into possible foreign exchange law breaches. The ED is especially focused on how these e-commerce platforms might influence product prices indirectly, potentially giving preferred sellers an unfair advantage and creating an uneven playing field. Sources reported that the raids spanned 19 locations in India, but no specific seller names have been disclosed. Both Amazon and Flipkart have yet to respond to requests for comment.

This investigation marks yet another regulatory setback for Amazon and Flipkart, two of India’s largest e-commerce players, who see India as a high-potential growth market amid a rapidly expanding e-commerce sector. The ED has been scrutinising the business practices of these companies for years, looking closely at how they might circumvent foreign investment laws designed to limit multi-brand retail operations by foreign entities. Indian law restricts these companies to running a neutral marketplace platform, forbidding direct control over product inventory.

A recent antitrust report, seen by Reuters but not yet publicly released, claims that Amazon and Flipkart exert considerable control over inventory and maintain close relationships with select sellers. The report describes some sellers as “name lending enterprises,” implying they may act as fronts, allowing the platforms to manage product listings and inventory in ways that might sidestep regulatory restrictions.

Adding fuel to the fire, India’s commerce minister recently criticised Amazon, suggesting that the company’s substantial investments in India often serve to offset business losses, indicating possible “predatory pricing” tactics. This statement underscores the growing regulatory scrutiny on foreign e-commerce platforms as they navigate India’s competitive retail landscape.