India’s financial crime agency, the Enforcement Directorate (ED), is intensifying its investigation into Amazon and Flipkart, two of the country’s largest e-commerce platforms, by summoning their top executives. According to a senior government official, this move comes on the heels of recent raids on the companies’ key sellers over alleged violations of foreign investment regulations.
The probe highlights growing regulatory scrutiny in India’s e-commerce market, valued at around $70 billion. With Amazon and Flipkart commanding more than half of the sector, authorities are increasingly concerned about foreign companies’ compliance with Indian laws intended to level the playing field for local businesses.
According to Indian law, foreign-owned e-commerce firms are barred from holding direct inventory of goods they sell, requiring them instead to operate as neutral marketplaces for third-party sellers. However, ongoing investigations suggest these platforms may have circumvented these restrictions by exercising substantial control over select sellers, effectively controlling inventory and pricing. Some of these sellers are “name-lending enterprises,” meaning they are simply conduits for Amazon and Flipkart to exert control over the retail chain.
Sources indicate that Amazon and Flipkart have consistently denied any violations, insisting they follow all legal requirements. However, past probes, including a 2021 Reuters investigation, revealed that Amazon allegedly maintained “end-to-end control” over inventory managed by certain sellers. The probe noted that these sellers received privileged access to Amazon’s tools and discounts on fees—advantages not available to smaller, independent sellers.
The recent raids, which reportedly lasted several days, targeted two Amazon sellers and four associated with Flipkart. Among those raided was Appario, previously one of Amazon’s largest sellers in India. Documents obtained during these operations are being reviewed, and the ED plans to examine data covering at least the past five years to assess the depth of these sellers’ connections with Amazon and Flipkart.
India’s e-commerce regulations are designed to prevent foreign companies from monopolizing the market at the expense of small businesses, which have repeatedly complained about predatory practices. Industry watchdogs claim that the dominance of large platforms like Amazon and Flipkart stifles competition and undermines traditional retail. Additionally, recent scrutiny has expanded to other online services, such as food delivery giants Swiggy and Zomato, which have also faced accusations of favouritism toward select restaurants.
The outcome of this investigation could have a major impact on how e-commerce operates in India, with the potential for further tightening of regulations to ensure compliance with foreign investment rules. With the ED now turning its attention to the executives, Amazon and Flipkart’s ability to sustain their growth in India may hinge on their cooperation and transparency with the authorities.
