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India Raids Amazon, Flipkart Seller Offices in Foreign Investment Probe

By  |  November 7, 2024

India’s financial crime agency has conducted raids at offices of select sellers associated with Amazon and Walmart-owned Flipkart, investigating potential breaches of the country’s foreign investment regulations. According to government sources, the raids took place in New Delhi, Mumbai and Bengaluru, targeting around 19 locations tied to sellers on the eCommerce platforms, per Reuters.

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    The investigation is the latest in a series of regulatory challenges facing Amazon and Flipkart in India, a rapidly expanding eCommerce market. Both companies have emphasized that they adhere to Indian laws, but the searches mark an escalation in scrutiny as the companies confront accusations of distorting competition in favor of select sellers. As reported by Reuters last month, an inquiry by India’s antitrust regulator found evidence that Amazon and Flipkart had allegedly given preferential treatment to certain sellers, potentially violating competition laws.

    Sources within the government indicate that the current raids align with the findings of the antitrust body’s report. The Enforcement Directorate (ED), the financial crime agency responsible for the investigation, has been looking into both companies for years, probing claims of indirect influence over pricing and unfair competition on their platforms. India’s foreign investment regulations stipulate that multi-brand retailers like Amazon and Flipkart must operate as marketplaces for third-party sellers rather than directly selling or setting prices themselves.

    Related: Unpacking The Implications of The FTC’s Antitrust Case Against Amazon for Online Marketplace Competition

    A senior government official involved in the investigation described the raids as part of the ED’s broader examination of whether the eCommerce giants are undermining foreign exchange laws through their partnerships with certain sellers. According to Reuters, the official refrained from disclosing the names of specific sellers targeted in the raids.

    A second government source further noted that the raids reflect concerns over how these platforms may indirectly influence product prices, potentially contravening India’s market fairness requirements. By intervening in seller operations, the companies could be limiting equal opportunities for all merchants on their platforms, said the source.

    Both Amazon and Flipkart have yet to respond to inquiries regarding the investigation, while representatives from the Enforcement Directorate have declined to offer further comment at this time.

    The raids underscore the increasing pressure on Amazon and Flipkart as they work to navigate India’s stringent eCommerce regulations. India, one of the world’s most promising eCommerce markets, has seen its regulations tightened in recent years, aimed at protecting local businesses from international competition.

    Source: Reuters