The Indian government's enforcement agency is set to summon executives from Amazon (AMZN, Financial) and Flipkart, a Walmart (WMT) subsidiary, as part of an ongoing investigation into alleged violations of foreign investment laws. This move follows recent raids on sellers linked to these e-commerce giants, highlighting the increased scrutiny by regulators in India's booming $70 billion e-commerce market.
Both Amazon and Flipkart have consistently claimed compliance with Indian laws, yet the Indian Enforcement Directorate has been investigating accusations that these companies manipulate inventory through select sellers. Indian regulations prohibit foreign e-commerce entities from holding inventory for direct sales on their websites, requiring them to operate purely as marketplaces.
A government insider disclosed that the federal agency plans to summon the companies' executives after last week's raids on sellers, with documents seized being reviewed for evidence of foreign investment rule violations. The raids extended into the weekend, unveiling such violations. The agency will also examine sellers' business data and transactions with these e-commerce platforms over the past five years.
No immediate comments were provided by Amazon, Flipkart, or the Indian Enforcement Directorate regarding these developments.
Data from Datum Intelligence indicates that Flipkart held a 32% market share in India's e-commerce sector last year while Amazon accounted for 24%, collectively making up roughly 8% of the country's $834 billion retail industry. The recent raids were prompted by antitrust findings that accused both platforms of exerting excessive control over inventory, with sellers acting merely as nominal operators.
At least two Amazon sellers and four Flipkart sellers were raided last week, according to sources familiar with the matter. In 2021, an internal Amazon investigation revealed that the company exercised significant control over certain large sellers' inventories. Last week's raids included Appario, once Amazon India's largest seller, where financial records were scrutinized, and executives were questioned.
Appario was internally termed a "special" merchant, receiving preferential treatment like discounted fees and access to Amazon's global retail tools for inventory management, despite regulatory restrictions. Appario did not respond to requests for comment.
Growing complaints of unfair business practices harming smaller businesses have led to increased scrutiny of online retail and delivery platforms in India. Reports also surfaced last week of antitrust findings against food delivery giants Zomato and Swiggy, supported by SoftBank, for favoring chain restaurants on their platforms.
