India's Financial Crime Agency Investigates Flipkart and Amazon

By Nikunj Ohri and Aditya Kalra

NEW DELHI (Reuters) – India's financial crime agency will summon Flipkart and Amazon executives as it escalates an investigation into alleged violations of foreign investment laws. This comes shortly after raids on some e-commerce sellers linked to these firms, according to a senior government source.

Growing Regulatory Scrutiny

The agency's actions indicate increasing supervision of Walmart-owned Flipkart and Amazon as sales surge in India's $70 billion e-commerce market. Previous antitrust investigations found both companies guilty of favoring select sellers illegally.

Both Amazon and Flipkart assert that they comply with Indian regulations, yet the Enforcement Directorate has consistently probed accusations that they control inventory through certain sellers—an action banned for foreign e-commerce firms in India.

Agency's Planned Actions

Following successful raids on sellers associated with these platforms, the Directorate plans to question company executives. It is also scrutinizing documents seized during operations. The raids confirmed suspicions of violations of foreign investment laws, as per the source who requested anonymity due to confidential details.

The seizure of past business data involving sellers and their transactions over the last five years is also a part of the ongoing investigation.

Market Share Insights

According to Datum Intelligence, Flipkart held a 32% market share while Amazon had a 24% share in India’s e-commerce sector last year, which constitutes about 8% of the retail market worth $834 billion.

Trigger for Raids

The recent raids stemmed from findings within the antitrust investigation, which concluded that these e-commerce platforms exerted excessive control over inventory.

Reports indicated that Amazon's significant Indian seller, Appario, was among those raided. Amazon reportedly provided this seller with special privileges that included reduced fees and additional tools for inventory management, as uncovered in a previous Reuters investigation.

Broader Scrutiny in E-commerce

Online shopping platforms are facing intensified scrutiny in India over complaints regarding unfair practices affecting smaller sellers. Last week, it was reported that food delivery services Zomato and Swiggy also breached regulations by favoring certain restaurants in their business dealings.