Amazon Now Caught In ED’s Probe On Foreign Exchange Act Violations


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The probe was initiated after ED received communication from the Commerce Ministry seeking “necessary action” against ecommerce players like Amazon and Flipkart

Sellers associations have also claimed that Flipkart and Amazon violated FEMA and FDI rules by adopting illegal structuring/investments and practices

On Monday (January 25), Amazon filed a petition in the Delhi High Court, seeking imprisonment of Kishore Biyani, the founder of Future Group

The Enforcement Directorate is probing Amazon India for alleged violations of the Foreign Exchange Management Act (FEMA) to add to the ecommerce giant’s woes in the Indian market.

The probe was initiated after ED received communication from the commerce ministry seeking “necessary action” against ecommerce players like Amazon and Flipkart pertaining to certain multi-brand retail businesses and an observation made by the Delhi High Court in relation to Amazon, according to PTI, which first reported the development.

The ED has also received a communication from the Department for Promotion of Industry and Internal Trade (DPIIT), containing a representation from the Confederation of All-India Traders (CAIT). The sellers association has contended that major ecommerce players like Flipkart and Amazon violated FEMA and FDI rules by adopting illegal structuring/investments and practices.

The Karnataka High Court is hearing India’s antitrust watchdog, the Competition Commission of India’s (CCI) plea for vacating the stay on an investigation into alleged anti-competitive practices by Amazon and Flipkart, based on complaints filed by trader bodies. Sellers allege that Amazon gives preference to its own sellers Cloudtail and Appario, and has a control on the two entities through common directors, which is barred under the FDI rules for ecommerce.

Last week, Amazon told the high court that Amazon Seller Services, which runs the company’s India ecommerce platform, doesn’t have any common director with seller entities Cloudtail and Appario. 

Besides these issues, separate violations are being alleged against Amazon by various organisations, for its efforts to stall the deal for the sale of Future Retail to Reliance Retail. 

In 2019, Amazon had bought a 49% stake in Future’s unlisted firm, Future Coupons, the promoter-entity of Future Retail, (which owns 7.3% equity in BSE-listed Future Retail Ltd through convertible warrants), with the right to buy into the flagship Future Retail after a period of three to 10 years.

In October, Amazon had approached the Singapore International Arbitration Centre (SIAC) and won a temporary injunction against the INR 24,713 Cr deal for the sale of Future Group’s retail, wholesale, logistics and warehousing divisions to Reliance Retail. 

Amazon had contended that by entering into a deal with Reliance, Future Group was violating a non-compete contract, as the sale of businesses to certain companies (including Reliance) was barred. 

While the cases are still being heard, on Monday (January 25), Amazon filed a petition in the Delhi High Court, seeking imprisonment of Kishore Biyani, the founder of Future Group, along with the company’s other promoters. Amazon wrote in its petition that the company’s promoters had violated securities market rules by illegally encumbering group company shares.





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