ED raids Amazon, Flipkart sellers in foreign investment law violation investigation

The Enforcement Directorate conducted raids on 19 locations across various states including Haryana, Karnataka, Telangana under the provisions of FEMA. The probe was launched after it was alleged that vendors of e-commerce giants were violating India's FDI rules by influencing sale price of goods.

The Enforcement Directorate on Thursday conducted raids against some of the "main vendors" operating on e-commerce platforms like Amazon and Flipkart as part of a foreign investment "violation" investigation, official sources said. ED raided a total of 19 premises of these "preferred" vendors located in Delhi, Gurugram, Hyderabad (Telangana) Panchkula (Haryana), and Bengaluru (Karnataka) as part of the action, they added.

Probe under FEMA

The sources said that the probe was initiated by the federal probe agency under the provisions of the Foreign Exchange Management Act (FEMA) after several complaints were lodged against the two large e-commerce companies in which it is alleged that they were "violating India's FDI (foreign direct investment) rules by directly or indirectly influencing the sale price of goods or services and not providing level playing field for all the vendors".

CCI also looking into allegations

Notably, the Competition Commission of India (CCI), which works to ensure fair business across sectors in the marketplaces, is already looking into alleged anti-competitive ways of e-commerce companies. Additionally, the Confederation of All India Traders (CAIT) and mainline mobile retailers' association AIMRA had also filed petition with the CCI sometime back seeking immediate suspension of operations of Flipkart and Amazon.

According to their petition, the companies were engaged in predatory pricing and fueling money to offer heavy discounts on products. The petition further said that these practices are creating a grey market of mobile phones, causing losses to the exchequer "as players in the grey market evade taxes."

Commerce Minister Piyush Goyal raises concern

It must also be noted that Commerce and Industry Minister Piyush Goyal had recently flagged similar concerns and questioned Amazon's announcement of USD 1 billion investment in India, asserting that the e-commerce platform was not doing any great service to the Indian economy but filling up for the losses it had suffered in the country.

In August, he said that their huge losses in India "smells of predatory pricing", which is not good for crores of small retailers of the country. Goyal asserted that e-commerce companies like Amazon were eating into the small retailers' high-value, high-margin products that are the only items through which the mom-and-pop stores survive.

He further added that with the fast-growing online retailing in the country, "are we going to cause huge social disruption with this massive growth of e-commerce".

(With PTI Inputs)