Explained: Why Amazon, Flipkart sellers raided by ED at 19 locations

Enforcement Directorate (ED) conducted searches across 19 locations linked to major sellers on Amazon and Flipkart platforms, the central probe agency said on Thursday. The searches, conducted in Delhi, Bengaluru, Mumbai, Hyderabad, and Panchkula, were part of an investigation under the Foreign Exchange Management Act (FEMA).

What are the allegations against Amazon and Flipkart?

At the heart of the investigation are allegations that Amazon and Flipkart manipulated their platforms to favour select sellers. India’s FDI rules mandate that foreign e-commerce firms act only as marketplaces, avoiding direct influence over product pricing or inventory to ensure a level playing field among vendors.

However, complaints from small retailers accuse the two companies of violating these rules by providing exclusive benefits to certain sellers and offering deep discounts, which allegedly stifles competition.

"The e-commerce entities providing marketplace are violating FDI rules by directly or indirectly influencing the sale price of goods or services and not providing level playing field for all the vendors," ED said in a statement.

The ED’s investigation comes on the heels of findings from the Competition Commission of India (CCI), which in August reported that both Amazon and Flipkart engaged in anti-competitive practices. In a 1027-page report on Amazon and a separate 1,696-page report on Flipkart, the CCI found the e-commerce platforms promoted select sellers through preferential listings and gave them access to marketing services, favourable search rankings, and discounts — all while sidelining other sellers.

"Each of the anti-competitive practices alleged ... were investigated and found to be true," said CCI, according to Reuters.

"Ordinary sellers remained as mere database entries," the two reports said in identical conclusions on both companies.

This investigation, which was triggered by a complaint from the Delhi Vyapar Mahasangh, follows years of discontent among traditional retailers who claim that the e-commerce giants are crippling their businesses.

In 2021, a Reuters investigation revealed Amazon’s close control over some top sellers, a practice against Indian laws prohibiting foreign e-commerce firms from holding product inventory directly.