The Enforcement Directorate (ED) has uncovered “direct links” between e-commerce giants Amazon and Flipkart and their preferred sellers, the Economic Times has reported.
The agency, investigating alleged violations of foreign direct investment (FDI) laws, has interrogated the top five sellers on both platforms and found that most are closely connected to the e-commerce companies, the report said.
The agency has significant evidence, including “email dumps” from Amazon and Flipkart sellers, to suggest that the two companies exert direct control over their preferred sellers. A review of certain emails confirmed the control, extending from inventory to profit margins, the report cited officials as saying.
While Amazon and Flipkart have declined to comment on the findings, the report said neither company had got summons or communication from the ED, so far. Moneycontrol could not independently verify the report.
The probe has also revealed that the two firms had significant oversight over their sellers’ operations, including control over warehouses, inventory and even profit margins.
One seller’s testimony revealed stark discrepancies between his annual turnover, which runs into several thousand crores, and his modest annual profit of just Rs 20 lakh, suggesting that profit margins may also be manipulated by Amazon and Flipkart.
The seller, who lives in a two-room apartment, reportedly works under the giants’ direct supervision, with even his bank accounts monitored.
The ED investigation further found flaws in the “Just in Time” (JIT) model of stock management employed by Amazon and Flipkart.
FDI law mandates a marketplace open to all sellers, including small retailers. However, by controlling key aspects such as inventory, warehouses, and profit margins, Amazon and Flipkart may be violating FDI rules and reducing the marketplace to a multi-brand platform benefiting only their own interests.
The ED is expected to file a final complaint against Amazon and Flipkart under the Foreign Exchange Management Act (FEMA) within the next three months. The agency plans to question top officials from both companies to further examine the evidence before filing the complaint, the report said.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
