- India’s enforcement Bureau has raided the offices of several Amazon and Flipkart sellers in an investigation into alleged forex irregularities
- Both Amazon and Flipkart have come under scrutiny for their business practices in India
What happened
The Enforcement Directorate (ED) of India conducted multiple raids on Thursday, November 7, targeting 19 locations of key Amazon and Flipkart suppliers in Delhi, Bangalore, Mumbai, Hyderabad, and Panchkula, Haryana, under the Foreign Exchange Management Act (FEMA). These raids were in response to allegations that these sellers had violated FEMA regulations.
According to an official statement from India’s central tax authority, the ED initiated a FEMA investigation after receiving multiple complaints against Amazon and Flipkart. The ED alleges that the e-commerce platforms violated Foreign Direct Investment (FDI) rules. They impacting the pricing of goods and services directly or indirectly and failing to ensure fair competition for all suppliers.
The investigation found that these sellers used intermediary structures to claim local seller status. While they actually receive foreign financial support, thereby bypassing India’s FDI regulations. This operation, carried out across several Indian cities, aims to improve regulatory transparency and strengthen compliance in the e-commerce sector.
Also read: ED searches 19 premises linked to main vendors of Amazon and Flipkart under FEMA
Also read: ED raids Amazon, Flipkart sellers in foreign investment law violation investigation
What it’s important
India’s raids on Amazon and Flipkart sellers highlight a global trend toward stricter e-commerce regulation, impacting both multinational corporations and local small businesses. For instance, in China, the UK-based electronics retailer TechSource Ltd faced substantial fines for non-compliance with foreign exchange and tax regulations. The company relies on repatriating funds from external markets to expand its operations in China. However, with regulatory tightening, TechSource was forced to adjust its cross-border cash flow processes. This increases the complexity of financial management and leads to higher operating costs. This incident demonstrates that heightened compliance standards worldwide may compel SMEs to alter their business models, potentially facing significant financial penalties.
Notably, for multinational e-commerce companies, the raids in India indicate the need to reassess operational models in that market. For example, Amazon may need to reduce the number of proprietary sellers on its platform. By doing so, it can avoid violating local regulations by over-controlling the supply chain. This trend is also prompting other multinationals relying on the Indian market to prioritize compliance, aiming to minimize compliance costs and avoid similar raids or potential fines.
