India’s financial crime agency, the Enforcement Directorate (ED), has carried out raids on sellers linked to Amazon and Walmart-owned Flipkart, targeting alleged violations of the country’s foreign investment rules. The pan-India operation reportedly involved searches at seller locations and Amazon and Flipkart subsidiaries in major cities such as Delhi, Mumbai, Hyderabad and Bengaluru. “The raids on Amazon and Flipkart sellers are part of ED’s investigation into alleged violations of foreign exchange laws,” Reuters quoted a government source as saying.

This latest investigation follows findings by India’s antitrust agency, which concluded that both Amazon and Flipkart, along with some of their sellers, violated competition laws by favoring certain sellers. The companies have consistently claimed to comply with Indian regulations, but the ED is currently examining whether any violations of the Prevention of Money Laundering Act (PMLA) have occurred in transactions on these platforms.

A senior official said the raids were part of an ongoing investigation into possible currency law violations. ED specifically focuses on how these e-commerce platforms can indirectly affect product prices, potentially giving preferred sellers an unfair advantage and creating an uneven playing field. Sources reported that the raids were spread across 19 locations in India, but no specific vendor name was disclosed. Both Amazon and Flipkart are yet to respond to requests for comment.

The investigation marks another regulatory setback for Amazon and Flipkart, two of India’s biggest e-commerce players, which see India as a high-potential growth market amid a rapidly expanding e-commerce sector. ED has been examining the business practices of these companies for years, taking a close look at how they can circumvent foreign investment laws designed to limit multi-brand retail operations of foreign entities. Indian law restricts these companies from operating a neutral market platform and prohibits direct control over product inventory.

A new antitrust report seen by Reuters but not yet made public alleges that Amazon and Flipkart maintain significant control over inventory and maintain close relationships with select sellers. The report describes some sellers as “name lenders,” implying that these sellers may act as fronts, allowing platforms to manage product listings and inventory in ways that can bypass regulatory restrictions.

Adding fuel to the fire, India’s Commerce Minister recently criticized Amazon, suggesting that the company’s significant investments in India often serve to offset job losses and point to possible “predatory pricing” tactics. The revelation underscores the growing regulatory scrutiny on foreign e-commerce platforms as they navigate India’s competitive retail landscape.