India’s financial crimes agency, the Enforcement Directorate (ED), has raided sellers linked to Amazon and Walmart-owned Flipkart over alleged violations of the country’s foreign investment rules. Reportedly, the pan-India operation included searching seller locations and Amazon and Flipkart subsidiaries in major cities like Delhi, Mumbai, Hyderabad and Bengaluru. “The raids on Amazon and Flipkart sellers are part of the ED’s investigation into alleged violations of foreign exchange laws,” Reuters quoted a government source as saying.

This latest investigation follows the findings of India’s antitrust body, which concluded that both Amazon and Flipkart violated competition laws by favoring specific sellers, along with some of their sellers. The companies have consistently claimed to be abiding by Indian regulations, but the ED is now investigating whether there have been any violations of the Prevention of Money Laundering Act (PMLA) through transactions on these platforms.

A senior official revealed that the raids are a part of an ongoing investigation into possible foreign exchange law violations. The ED is particularly focusing on how these e-commerce platforms can indirectly influence product prices, potentially giving unfair advantages to preferred sellers and creating an uneven playing field . Sources said the raids took place at 19 locations in India, but the name of any specific seller has not been disclosed. Both Amazon and Flipkart are yet to respond to requests for comment.

The investigation is another regulatory blow for Amazon and Flipkart, India’s two biggest e-commerce players, which see India as a high-potential growth market amid a rapidly growing e-commerce sector. The ED has been investigating the business practices of these companies for years, and is closely watching how they circumvent foreign investment laws designed to limit multi-brand retail operations by foreign entities. Indian law restricts these companies to run a neutral marketplace platform, prohibiting direct control over product listings.

A recent antitrust report seen by Reuters but not yet publicly released claims that Amazon and Flipkart exercise considerable control over inventory and maintain close relationships with select sellers. The report describes some sellers as “name lending enterprises”, meaning they may act as a front, allowing the platform to manage product listings and inventory in ways that Which can bypass regulatory restrictions.

Adding fuel to the fire, India’s commerce minister recently criticized Amazon, suggesting that the company’s substantial investments in India often serve to offset business losses, indicating a potential “predatory pricing” strategy. Is. The statement underlines the increasing regulatory scrutiny on foreign e-commerce platforms as they navigate India’s competitive retail landscape.