 |
|
The Indian e-commerce giants, Amazon and Flipkart, are facing mounting scrutiny from the country's financial crime agency, the Enforcement Directorate (ED), over alleged violations of foreign investment laws. This heightened scrutiny comes in the wake of raids conducted by the ED on several sellers associated with these e-commerce companies. The ED's investigation is focusing on allegations that these companies have been exerting undue control over inventory through select sellers, potentially circumventing Indian laws that restrict foreign e-commerce entities from holding inventory.
India's regulations prohibit foreign e-commerce companies from directly holding inventory of products they sell on their websites, requiring them to operate solely as platforms connecting buyers with sellers. The ED is now investigating whether Amazon and Flipkart have been circumventing this rule by indirectly controlling inventory through designated sellers. This investigation follows an earlier antitrust investigation that revealed that both companies had been engaging in practices that favored certain sellers, potentially creating an unfair competitive advantage.
The ED's investigation is expected to delve into the past five years of business data from both companies and their associated sellers, examining their financial dealings and the extent of control exercised over inventory. These investigations are raising concerns about the potential for foreign companies to exert undue influence over the Indian e-commerce market. This scrutiny comes at a time when both Amazon and Flipkart are experiencing rapid growth in India, with a combined market share of 56% in the $70 billion Indian e-commerce sector.
The latest raids and investigations highlight a growing trend of increased scrutiny of online shopping and delivery platforms in India, driven by concerns about unfair business practices that could disadvantage smaller players. This trend is expected to have significant implications for the future of e-commerce in India, shaping the competitive landscape and potentially influencing how foreign companies operate within the country's market.
Source: Amazon, Flipkart executives might be summoned amid increasing scrutiny: Report