The Enforcement Directorate (ED) has shifted its focus to investigating Amazon and Flipkart, after sellers, for allegedly violating foreign direct investment norms through their arrangements with vendors.
ED investigates violations under FEMA
According to ET, the Enforcement Directorate (ED) is investigating potential violations under the Foreign Exchange Management Act (FEMA). The agency, which was previously looking into the sellers, is now checking if the e-commerce companies had control over their vendors, even though they are supposed to act only as platforms.
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Previously in November, the Enforcement Directorate (ED) raided the offices of some sellers linked with Amazon and Flipkart. “The sellers covered during the searches were summoned and have been questioned to explain certain transactions and arrangements. Documents are being studied thoroughly,” a source mentioned to ET.
ED summons executive from Amazon & Flipkart
After searching sellers’ offices in Delhi NCR, Mumbai, Bengaluru, Gurugram, and Hyderabad, the Enforcement Directorate (ED) may summon executives from Amazon and Flipkart.
“The main focus is to ascertain whether Amazon and Flipkart operated through a preferred set of sellers, which were invariably controlled by them but disguised as independent vendors, thus violating FDI norms,” said a source.
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This happens as Amazon and Flipkart face legal issues. Recently, the Competition Commission of India (CCI) found them guilty of breaking competition laws by favouring certain sellers on their platforms.
Further, the reports stated that Amazon’s preferred sellers got an “advantage in the online listing,” making their products more noticeable to customers during searches.
For Flipkart, the Commission noted that preferred sellers received services like marketing and delivery at a very low cost. Now, the CCI is considering taking the case to the Supreme Court.
