FDI: Government to send summons to Amazon and Flipkart in case of rules violation

New Delhi| The government may issue summons to e-commerce platforms Amazon and Flipkart for questioning in case of violation of Foreign Direct Investment (FDI) rules. Sources said, based on the investigation of documents found during the raid at the sellers of Amazon and Flipkart last week, the Enforcement Directorate (ED) is preparing to call officials of both the companies. Business data of sellers and transactions with e-commerce platforms in five years will also be scrutinized.

Search operations continued till Saturday at two big sellers of Amazon and four big sellers of Flipkart. The documents found proved that foreign investment rules were violated. The raid revealed that both the platforms had end-to-end control over the inventory and the vendors were just in name.

A Reuters investigation in 2021, based on Amazon internal papers, showed that companies exercised significant control over the inventory of some of the largest sellers. In fact, small traders are incurring losses due to the anti-competitive business practices of Amazon and other companies, hence they are being monitored. Recently, ED had raided the vendors of both the companies on charges of benefiting selected vendors.

Appario, once Amazon’s largest Indian seller, was also raided last week, one of the sources said on Monday. Appario was described internally as a special trader. Unlike other vendors, Appario was benefited for its use of things like inventory management.

As per the rules, foreign e-commerce platforms cannot keep inventory in India. They can only work as an online market. Amazon and Flipkart’s sales are growing rapidly in India’s e-commerce market of around Rs 5.91 lakh crore. Datum Intelligence estimates that Flipkart has 32 percent market share and Amazon 24 percent market share in Indian e-commerce last year. It accounts for 8 percent of the country’s total $834 billion retail market.

On the other hand, the Competition Commission of India is investigating against online food delivery platforms Zomato and Swiggy in the case of violation of competition rules. Both of them are accused of benefiting selected restaurant chains.However, both the companies have termed the news of investigation as misleading. Along with this, Zomato said that it follows the laws of the country. The Commission has not passed any order since the notice dated 5 April 2022. At the same time, Swiggy says that he is committed to following the rules.