New Delhi: India’s Enforcement Directorate is preparing to summon executives of Amazon and Flipkart as more red flags over potential breaches of foreign investment norms have emerged. This comes in the wake of recent raids on sellers connected with the country’s two leading e-commerce majors that have been snapping up gains in the rapidly growing Indian online shopper market worth about $70 billion.
The ED recently zeroed in on two Amazon sellers and four from Flipkart as part of an antitrust investigation that concluded that both platforms were either controlling inventory in the background or treating sellers as mere intermediate levels. For instance, Appario, once the largest seller for Amazon in India, received special benefits, including lower fees and advanced inventory management tools as per a 2021 Reuters investigation.
Amazon and Flipkart are under investigation for certain claims about favoritism to certain sellers on these platforms. An Indian law bars a foreign e-commerce company from owning or selling goods directly. Instead it can only act as a site where independent sellers can operate. While both companies claim they comply with the local regulations, the ED has been reviewing complaints for decades that the two exercise too much control over the stock sold by these vendors.
The ED is currently scanning the documents and transactions it collected in these raids over the past five years. It reflects growing scrutiny by the regulators who feel that unfair practices have gained a foothold in India’s e-commerce sector, where the smaller sellers are oftentimes at an advantage compared to big players like Amazon and Flipkart.
Flipkart held 32% of India’s e-commerce market in the last year, while Amazon stood at 24%. Together they account for about 8% of the country’s total retail sector, which is estimated at $834 billion. It is all caught in this broad movement with many industries now facing stricter checks to ensure fair competition and legal compliance.
In short, the ED’s intention to grill executives from Amazon and Flipkart is symptomatic of a tougher regulatory climate in India’s e-commerce market.
