FILE PHOTO: Smartphone with Flipkart logo is seen in front of displayed Amazon logo in this illustration taken, July 30, 2021. REUTERS/Dado Ruvic/Illustration/File Photo
NEW DELHI (Reuters) -India's financial crime agency has raided offices of some sellers operating Amazon and Walmart-owned Flipkart in an investigation into alleged violations of foreign investment rules, three government sources said on Thursday.
The searches come weeks after Reuters reported India's antitrust body had found the two companies and their sellers violated competition laws by giving preference to select sellers on their platforms. Both companies have maintained they comply with Indian laws.
The raids are the latest setback for Amazon and Flipkart, which count India as a key growth market where e-commerce sales are rapidly rising.
One senior government source said raids were being carried out in New Delhi, Mumbai and Bengaluru, but did not give names of sellers whose offices were being raided.
"The raids on sellers of Amazon and Flipkart is a part of ED’s probe ... for alleged violations of foreign exchange laws," said the first government source with direct knowledge.
Amazon and Flipkart did not immediately respond to requests for comment. A representative of the financial crime agency said he had no immediate comment.
A second government source said the raids were being conducted at 19 locations in India, and the agency was investigating how e-commerce platforms indirectly influence the sale price of goods, in violation of Indian laws, and do not provide a level playing field for all sellers.
The Enforcement Directorate agency has been investigating both e-commerce giants for years for allegedly bypassing foreign investment laws that strictly regulate multi-brand retail and restrict such companies to operating a marketplace for sellers.
The first government source on Thursday said it was conducting the latest searches on the observations of the antitrust body in its recently concluded investigation of the two companies.
Those Amazon and Flipkart antitrust investigation reports from August, which are not public but have been seen by Reuters, say the platforms "had end-to-end control over the inventory and the sellers are just name lending enterprises."
A Reuters investigation in 2021, based on internal Amazon papers, showed the company exerted significant control over the inventory of some of the biggest sellers, even though Indian laws prohibit foreign players from holding inventory of products.
India's commerce minister in August publicly slammed Amazon, saying its investments in India have often been used to cover its business losses, adding that such losses "smell of predatory pricing."
(Reporting by Nikunj Ohri and Aditya Kalra. Editing by Jane Merriman, Peter Graff and Sharon Singleton)
