ED’s Move Against Amazon, Flipkart, and Smartphone Brands: Here's Why

The Enforcement Directorate (ED) has accelerated its ongoing investigation of Amazon and Walmart-owned Flipkart by demanding sales records and documents from phone companies such as Apple and Xiaomi, sources reported by Reuters have said.

Enforcement Directorate is an organisation mandated with the investigation of offences of money laundering and violations of foreign exchange laws.

Why the ED Is Investigating

ED is investigating whether Amazon and Flipkart broke Indian e-commerce regulations that do not allow foreign-owned platforms to control merchandise or sell products directly. 

These regulations permit them to operate as a marketplace platform that connects buyers with third-party sellers. Both platforms are suspected of exercising control over the listed goods, which is unauthorised.

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What Data from Apple, Xiaomi Say

In recent weeks, the ED has issued formal notices to smartphone manufacturers such as Apple and Xiaomi, requesting that they provide online sales data and financial agreements with Amazon and Flipkart. Apple received the notice in March, according to one source. The aim is to know the terms of agreements between these phone brands and the e-commerce websites.

As per officials, this is merely a request for information and not an indication that the makers of the phones are being accused. But in case there is any violation, fines may be levied on the e-commerce companies.

Effect on India's E-Retail Market

India's online retail market is thriving and set to grow to more than $160 billion by 2028 from about $60 billion in 2023, according to Bain & Company. With almost 40% of smartphones being sold online, this study may have far-reaching consequences for the mobile retailing business.

Counterpoint Research statistics indicate Xiaomi and Samsung together have 33% of India's market and Apple has 7%. Offline retailers have been battered by online-exclusive launches and steep discounts, claim small retailers.

Background Of the Case

In 2021, Reuters broke the story that Amazon was purportedly controlling inventory through dominant sellers, which Amazon denied. Last year, India's antitrust regulator also charged Amazon and Flipkart with preferring some sellers and colluding with phone manufacturers that case remains pending.
 

The ED, Apple, Amazon, and Flipkart have not commented on the development so far.

Inputs from Reuters.