ED comes after Amazon, Flipkart and their preferred vendors

The Enforcement Directorate on Thursday, 7 November, conducted searches against some "main vendors" operating on e-commerce platforms of giants like Amazon and Flipkart. They were part of a foreign investment "violation" investigation, official sources said.

A total of 19 premises of these 'preferred' vendors located in Delhi, Gurugram and Panchkula (Haryana), Hyderabad (Telangana) and Bengaluru (Karnataka) were covered as part of the action, they said.

The sources said the probe was initiated by the federal agency under the provisions of the Foreign Exchange Management Act (FEMA), acting on several complaints against the two large e-commerce companies where it is alleged that they are "violating India's FDI (foreign direct investment) rules by directly or indirectly influencing the sale price of goods or services and not providing a level playing field for all the vendors".

It has been reported in the past that the Competition Commission of India (CCI), which works to ensure fair business practices across sectors in the marketplace, is already looking into regulating the alleged anti-competitive ways of e-commerce companies.

The Confederation of All India Traders (CAIT) and the mobile retailers' association AIMRA had also petitioned the CCI sometime back, seeking immediate suspension of Flipkart's and Amazon's operations. They alleged that the e-commerce companies were engaged in predatory pricing and burning cash to offer heavy discounts on products.

These practices, in turn, are creating a grey market of mobile phones, causing losses to the exchequer "as players in the grey market evade taxes", they had said.

Commerce and industry minister Piyush Goyal had recently amplified the same concerns, questioning Amazon's announcement of a USD 1 billion investment in India, saying the US retailer was not doing any great service to the Indian economy but covering for the losses it had suffered in the country.

He had said in August that these companies' were experiencing huge losses in India, which "smells of predatory pricing", which is not good for the country as it impacts crores of small retailers.

Goyal said e-commerce companies were eating into the small retailers' high-value, high-margin products that are the only items through which the mom-and-pop stores survive.

The minister had wondered, given the fast-growing online retailing sector in the country, "Are we going to cause huge social disruption with this massive growth of e-commerce?"