India's financial crime agency intensifies probe into Amazon and Flipkart over foreign investment violations

India's financial crime agency is intensifying its investigation into Flipkart and Amazon over suspected violations of foreign investment regulations, with plans to summon senior executives from both companies, Reuters reported.

This move comes shortly after the Enforcement Directorate conducted raids on several sellers operating on the two e-commerce platforms. The investigation, which signals mounting regulatory pressure on the global retail giants, follows concerns about their control over inventory, despite Indian laws prohibiting foreign-owned e-commerce firms from holding inventory themselves. These companies are only allowed to function as marketplaces, where third-party sellers list and sell goods directly to consumers.

Indian authorities have long suspected that Amazon and Flipkart circumvent these regulations by exerting significant control over the inventory of certain sellers. This latest investigation was prompted by an antitrust inquiry, which found that the two platforms were allegedly favoring select sellers, leading to unfair competition.

According to a senior government official familiar with the case, the Enforcement Directorate is now reviewing documents seized during the raids, which took place until Saturday. The agency plans to analyze business data from sellers over the past five years, which could provide further evidence of regulatory violations. The raids, which targeted at least two of Amazon's sellers and four of Flipkart's, have reportedly substantiated claims that foreign investment rules were breached.

Despite these allegations, both Amazon and Flipkart maintain that they fully comply with Indian laws. The investigation into their practices has raised broader concerns about the growing power of foreign e-commerce players in India's $70 billion online retail market. Flipkart, owned by Walmart, holds a 32% market share, while Amazon commands around 24%.

The scrutiny is part of a broader crackdown on perceived anti-competitive practices by online platforms in India. In addition to the e-commerce investigations, food delivery giants like Zomato and Swiggy are also under the antitrust lens for allegedly favoring certain restaurants on their platforms.

The Enforcement Directorate has yet to publicly comment on the details of the raids or the companies involved, and representatives from Amazon and Flipkart did not respond to requests for comment at the time of writing.