Mumbai: The Enforcement Directorate (ED) launched a pan India search operation on Thursday targeting premises of key vendors associated with e-commerce giants Amazon and Flipkart. The ED is investigating these vendors for alleged violations of the Foreign Exchange Management Act (FEMA), focusing on potential foreign exchange rule breaches by vendors on these major platforms.
The searches were commenced 19 location early in the Thursday morning, continued through the evening, on the the main vendors of these e-commerce companies, with premises located in Mumbai Delhi, Bengaluru, Hyderabad, and Haryana.
According to the sources, the ED initiated its alleged Foreign Exchange Management Act (FEMA) violation investigation based on several complaints filed against Amazon and Flipkart. The complaints allege that these e-commerce platforms, which provide marketplaces, are violating Foreign Direct Investigation (FDI) rules by directly or indirectly influencing the sale prices of goods and services, thereby fail to provide a level playing field for all vendors.
The Competition Commission of India (CCI), which works to ensure fair business practices across sectors in the marketplace, is already looking into alleged anti-competitive ways of e-commerce companies.
According to the sources
A search operation under FEMA was followed by a report submitted by the Competition Commission of India (CCI) regarding online marketplaces. The report found that both Amazon and Flipkart were giving preferential treatment to certain larger sellers. The CCI findings also alleged irregularities in the inventories and financial records of some vendors, raising concerns over preferential treatment, exclusive listings, and steep discounts provided by these larger sellers.
The CCI’s findings indicated both e-commerce giants may have breached local competition laws by prioritizing select sellers. In response, the ED’s searches seek to uncover potential FEMA violations, which typically result in civil penalties if confirmed.The officials said.
The ED conducts FEMA investigations as civil cases, with potential penalties in the form of fines. After initial searches, the agency issues notices to involved parties, demanding explanations for the alleged violations. If responses are found unsatisfactory, the ED may issue a final notice, including financial penalties and accrued interest.
While the current search operations target vendors and sellers associated with Amazon and Flipkart, the raids have not extended to the companies’ own premises.
Amazon and Flipkart have previously faced scrutiny for allegedly violating India’s foreign investment rules, which prohibit foreign-funded e-commerce companies from operating as inventory-based platforms. In recent years, both companies have either divested or restructured stakes in prominent sellers to comply with these regulations, yet questions about their operational model persist.
