The Enforcement Directorate (ED), India's government law enforcement and economic intelligence agency, will summon executives from Amazon and Walmart-owned Flipkart as part of an ongoing investigation into whether the two companies have violated India's investment laws.

The news, first reported by Reuters, comes a week after the ED raided vendors of both giants, and an Indian antitrust investigation found that the two companies violated laws by favouring some vendors, a senior government source told Reuters.

Although Amazon and Flipkart have said they did not violate Indian legislation, the ED probe, which has been ongoing for years, alleges that the companies exercised control over inventory of goods through selected sellers.

As such, they allegedly violated Indian laws, which prohibit foreign e-commerce operators from holding inventory of goods that can be sold on their website, forcing them to operate only a sellers marketplace.

The raids were part of a nationwide operation that included searches at vendors' offices and company branches in major Indian cities including Dehli, Bengaluru, Mumbai, and Hyderabad.

The inspections continued until Saturday and confirmed violations of foreign investment regulations, the government source said.

The senior government source added that the federal agency is reviewing documents seized from sellers during the operation, Reuters reported.

The latest raids were triggered by the findings made by antitrust investigations that Amazon and Flipkart “have end-to-end control over inventory and the sellers are just name lending firms.”

Data from Datum Intelligence says both companies' sales in the country have grown significantly in the past year. Last year, Flipkart had a 32 per cent market share and Amazon a 24 per cent share in Indian e-commerce, accounting for about eight per cent of the $934 billion retail sector.

In 2021, Reuters carried out an investigation which looked at Amazon documents showing that the company exerted significant influence over the inventory of some of the largest sellers breaching Indian laws.

Sources told Reuters that Amazon’s larger Indian seller Appario was also raided last week, with officials inspecting financial books and interrogating executives on the firm’s ongoing commitments with Amazon.

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