The planned action signals growing regulatory scrutiny of Walmart-owned Flipkart and Amazon when their sales are rapidly growing in India’s $70 billion ecommerce market. An antitrust investigation also found the two companies breached laws by favouring select sellers, Reuters has reported.
Amazon and Flipkart have maintained they comply with Indian laws, but the Enforcement Directorate has for years been investigating allegations the companies, through select sellers, exert control over inventory of goods.
Indian laws prohibit foreign ecommerce players from holding inventory of goods they can sell on their website, forcing them to only operate a marketplace of sellers.
After last week’s raids by the Directorate on Amazon and Flipkart sellers, the federal agency now plans to summon the company executives, and is currently reviewing documents seized from the sellers during the operation, a senior government source directly involved in the case said on Monday.
The searches went on until Saturday and have substantiated there were foreign investment rule violations, said the government source, who declined to be named as details of the raids have not been disclosed publicly.
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The Directorate will also analyse business data from sellers and their dealings with the ecommerce companies in at least the last five years, the official added. Amazon, Flipkart and the Enforcement Directorate, did not immediately respond to Reuters’ queries.
‘End-to-end control’
Datum Intelligence estimates Flipkart had a 32% market share and Amazon a 24% share last year in Indian ecommerce, which roughly accounts for 8% of the $834 billion retail sector.
The latest raids were triggered by Amazon and Flipkart antitrust investigation findings that said the platforms “had end-to-end control over the inventory and the sellers are just name lending enterprises.”
Two other sources with direct knowledge of the matter said at least two of Amazon’s sellers and four of Flipkart’s sellers were raided last week.
A Reuters investigation in 2021, based on internal Amazon papers, showed the company exerted significant control over the inventory of some of the biggest sellers, even though Indian laws prohibit foreign players from doing so.
One of the sources said on Monday that Appario, once Amazon’s biggest Indian seller, was among those raided last week, when officials inspected financial books and questioned executives about their dealings with the U.S.-based ecommerce giant.
Appario was internally referred to as a “special” merchant and received discounted fees and access to Amazon global retail tools used for things like inventory management, unlike other sellers, the Reuters investigation in 2021 found.
Appario did not respond to a request for comment.
Online shopping and delivery platforms face growing scrutiny in India due to complaints of unfair business practices that hurt smaller players. Reuters reported last week the antitrust body also found food delivery giants Zomato and Swiggy breached laws as they favoured select restaurants on their apps.
