The Confederation of All India Traders (CAIT) said the Enforcement Directorate (ED) must also take action against e-commerce giant Amazon, after reports emerged that the financial investigation agency had issued a show cause notice to Flipkart in a case dating back to the period from 2009 to 2015.
"The notice sent by the ED to Flipkart is a much awaited right step. Both Amazon and Flipkart are conducting a preferential seller system on their respective marketplace which is against the Foreign Direct Investment (FDI) norms for e-commerce for which CAIT has been raising its voice since a long time," CAIT said in a statement.
"We demand the ED to send similar notice to Amazon also since both Amazon and Flipkart are sailing in the same boat," CAIT added.
A report by news agency Reuters said that an ED show cause notice had been issued to Flipkart, its founders Sachin and Binny Bansal and investor Tiger Global. The ED has sought an explanation on why the company and its founders should not be charged a penalty to the tune of Rs 10,000 crore for alleged FEMA violations, the report added.
The Reuters report stated, quoting an ED official, that the case concerned an investigation into allegations that Flipkart violated laws after attracting foreign investment. As per norms, the marketplace is not allowed to hold any inventory of its own after securing investments from foreign firms, but Flipkart’s related party WS Retail sold goods to consumers on its shopping website.
Flipkart in a statement said it is in compliance with Indian laws and regulations, including FDI regulations. “We will cooperate with the authorities as they look at this issue pertaining to the period 2009-2015 as per their notice,” the company added.
CAIT's National President BC Bhartia and Secretary General Praveen Khandelwal have said alleged violation of laws between the period 2016 and 2021 by Amazon and Flipkart needs to be investigated, and a heavy fine must be levied. They also called for a ban on the e-commerce platforms of both the companies until the FDI norms are fully complied with.
"In the case of Amazon a large chunk of the goods are being sold by Cloudtail and Appario where Amazon has equity stake. Since the selling parties are related entities, both Amazon and Flipkart have violated the FDI norms for e-commerce," CAIT added.
"The foreign funded companies must act as a marketplace providing only technology facilitation and cannot sell the goods directly or indirectly. Whereas these companies were acting in inventory mode as well which is prohibited under the policy," Bhartia and Khandelwal further said.
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