India's financial crime agency has conducted raids on offices of some sellers operating on Amazon and Walmart-owned Flipkart as part of an investigation into alleged violations of foreign investment rules, according to three government sources on Thursday.
The searches follow reports from Reuters that India's antitrust body found the two companies and their sellers had violated competition laws by favoring select sellers on their platforms. Both Amazon and Flipkart have consistently stated that they adhere to Indian laws.
These raids mark another setback for Amazon and Flipkart, which view India as a crucial growth market amid the rapid rise of e-commerce sales. A senior government source revealed that the raids were taking place in New Delhi, Mumbai, and Bengaluru, but did not disclose the names of the sellers targeted.
The first government source with direct knowledge stated, "The raids on sellers of Amazon and Flipkart are part of the Enforcement Directorate’s probe for alleged violations of foreign exchange laws."
Amazon and Flipkart did not immediately respond to requests for comment. A representative of the financial crime agency declined to comment immediately.
A second government source noted that the raids were being conducted at 19 locations across India, with the agency investigating how e-commerce platforms indirectly influence the sale price of goods, thereby violating Indian laws and failing to provide a level playing field for all sellers.
The Enforcement Directorate has been scrutinizing both e-commerce giants for years, suspecting they have bypassed foreign investment laws that strictly regulate multi-brand retail and restrict these companies to operating as marketplaces for sellers.
The first government source indicated that the latest searches were based on the observations of the antitrust body from its recently concluded investigation of the two companies.
Reports from August's Amazon and Flipkart antitrust investigation, which are not public but have been seen by Reuters, suggest that the platforms "had end-to-end control over the inventory, with the sellers merely lending their names."
A Reuters investigation in 2021, using internal Amazon documents, revealed that the company exerted significant control over the inventory of some of the largest sellers, despite Indian laws prohibiting foreign players from holding inventory.
India's commerce minister publicly criticized Amazon in August, accusing the company of using its investments in India to cover business losses, implying that these losses "smell of predatory pricing."
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