“…necessary actions under the provisions of Foreign Exchange Management Act, 1999, have been taken for investigation by the Enforcement Directorate (ED),” Goyal said in a written reply to a question in the Lok Sabha.
Small businesses, which sell a significant share of these products, will be impacted due to the cancellations.
Commerce and industry minister Piyush Goyal on Wednesday said the government has received complaints against some e-commerce companies “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 said in a written reply to a question in the Lok Sabha. Separately, on Wednesday, the industry ministry also held consultations with stakeholders, including those representing brick-and-mortar stores, to seek their inputs to firm up an e-commerce policy.
In December 2020, the commerce and industry ministry had written to the Reserve Bank of India (RBI) and the ED to take “necessary action” on allegations made by a key traders’ body against Amazon, Flipkart and Walmart relating to the violations of FDI and other relevant rules. For their part, the e-commerce players have denied the charges and maintained that they abide by the relevant rules.
In its representations to the government, the Confederation of All India Traders (CAIT) had accused both Amazon and Walmart-backed Flipkart of exploiting loopholes in rules and frequently violating FDI policies relating to e-commerce by clandestinely offering discounts through sellers on their platforms, among others.
The CAIT had also objected to Flipkart Group’s `1,500-crore deal to pick 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, while the DPIIT formulates and notifies FDI policies, any violation of such rules is dealt under the penal provisions of the FEMA. This Act is administered by RBI, and ED is its enforcement authority.