Commerce and sector minister Piyush Goyal on Wednesday mentioned the government has received complaints against some e-commerce corporations “alleging violation of foreign direct investment (FDI) policy”.
“…necessary actions under the provisions of Foreign Exchange Management Act, 1999, have been taken for investigation by the Enforcement Directorate (ED),” Goyal mentioned in a written reply to a query in the Lok Sabha. Separately, on Wednesday, the sector ministry also held consultations with stakeholders, which includes these representing brick-and-mortar shops, to seek their inputs to firm up an e-commerce policy.
In December 2020, the commerce and sector ministry had written to the Reserve Bank of India (RBI) and the ED to take “necessary action” on allegations produced by a essential traders’ body against Amazon, Flipkart and Walmart relating to the violations of FDI and other relevant guidelines. For their aspect, the e-commerce players have denied the charges and maintained that they abide by the relevant guidelines.
In its representations to the government, the Confederation of All India Traders (CAIT) had accused each Amazon and Walmart-backed Flipkart of exploiting loopholes in guidelines and often violating FDI policies relating to e-commerce by clandestinely supplying discounts via sellers on their platforms, amongst other individuals.
The CAIT had also objected to Flipkart Group’s `1,500-crore deal to choose up a 7.8% stake in Aditya Birla Fashion & Retail (ABFRL). It had claimed that Flipkart Group, which operates e-commerce platforms such as Flipkart and Myntra, had a “clear intent to make ABFRL a preferred seller” on their marketplace platforms, in contravention of the FDI policy. Subsequently, the deal was cleared by the Competition Commission of India in January.
At present, though the DPIIT formulates and notifies FDI policies, any violation of such guidelines is dealt below the penal provisions of the FEMA. This Act is administered by RBI, and ED is its enforcement authority.