Amazon under government lens for possible violation of FDI norms

E-commerce giant Amazon has come under the scanner of the Enforcement Directorate (ED) for likely violation of the foreign direct investment (FDI) rules in India, a report by The Economic Times said citing sources.

ED suspects Amazon to be selling products directly to consumers while making it look as if it is doing so on behalf of third party vendors. Price manipulation is another issue which is also being taken note of by the ED. It suspects that Amazon is manipulating prices on its website, the report added.

Indian regulations currently does not allow FDI in multi-brand retail but firms with foreign investment can run 'marketplaces' which runs as virtual malls where other vendors sell to the consumers. Amazon says it runs a marketplace just like other foreign VC funded ventures such as Flipkart and Snapdeal or for that matter Ebay, one of the oldest online marketplaces active in India.

Amazon had launched its India marketplace last year and had been steadily gaining traction. So much so that Amazon founder and chief Jeff Bezos had recently said Indian operations might become the fastest in the company's history to clock $1 billion in gross merchandise value.

It had also announced plans to invest $2 billion in India to take on home-grown competition from Flipkart and Snapdeal.

Interestingly, its arch rival Flipkart had also come under the ED lens for possible violations of FDI norms. The current status of that investigation is not publicly disclosed. Flipkart, which had separated the ownership of the key vendor which earlier also used to run the site Flipkart.com, recently raised $1 billion in a record funding for an Indian tech firm and indeed one of the largest such funding rounds globally too.