Amazon's online retail practices in India come under scrutiny

Amazon India comes under ED scrutiny for possible violations of FDI rules.

Published Date
08 - Sep - 2014
| Last Updated
08 - Sep - 2014
 
Amazon's online retail practices in India come under scrutiny

The Enforcement Directorate is investigating online retailer Amazon to check whether the company has circumvented restrictions placed on foreign investors by selling directly to domestic consumers.

According to a report by Wall Street Journal, two people familiar with the matter have stated that the finance ministry is looking into whether Amazon.com's local subsidiary has sold directly to customers, under the ruse that the sales were made by other companies. India doesn't allow foreign firms to own majority stakes in retail companies that sell more than one brand. The online retailer is allowed to operate in India because it acts as a marketplace rather than a retailer, according to WSJ. Amazon did not make any comment on the matter.

Amazon charges third-party suppliers to use its website to sell some 17 million different products, from books to electronics. According to reports Indian investigators are also examining whether Amazon exerts control over the prices of products sold on its website.

"An ideal marketplace should not have any interference from the platform operator," WSJ quoted a source.

Amazon.com is planning to invest $2 billion more in India. The Seattle based ecommerce giant is expected to debut its drone delivery service in India by Diwali. The company is planning to gain the top spot in India's online retail market if it succeeds in drone delivery. According to a recent Crisil report, the Indian online retail market is expected to reach Rs 50,000 crore by 2016, making it a major target for foreign retailers.

Online retailer Flipkart Internet Pvt., has also come under investigation for violating Indian rules now that it has accepted more foreign ownership, according to sources.

However a company spokesperson stated, "Flipkart is in complete compliance with the laws of the land. We will continue to support the authorities whenever we are approached."

Source: WSJ