The Enforcement Directorate (ED) on Wednesday filed a Foreign Exchange Management Act (FEMA) case against Flipkart-backed e-commerce platform Myntra Designs Pvt Ltd and its related entities for flouting foreign direct investment (FDI) norms to the tune of over Rs 1,654 crore.
Myntra and related entities carried out multi-brand retail trade operations while claiming to function as “wholesale cash and carry” businesses, an activity not permitted under the current FDI policy, according to the ED.
The agency said this was a misrepresentation in violation of India’s FDI policy, which places curbs on foreign investment in multi-brand retail.
The case was registered against the Bengaluru-headquartered Myntra, its linked companies and its directors, under Section 16(3) of FEMA after receiving what it called 'credible information.'
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Further details on individual liability or potential penalties are expected as the probe progresses.
The investigation comes at a time when e-commerce firms operating in India, particularly those backed by foreign investment, are facing increasing regulatory scrutiny for allegedly bypassing FDI rules through complex business arrangements.
In November, 2024, the ED conducted several searches under the FEMA at 19 premises located in Delhi, Bengaluru, Mumbai, Hyderabad and Panchkula (Haryana) at main vendors of Amazon and Flipkart.
According to the agency, the e-commerce entities providing marketplace are violating FDI rules by influencing the sale price of goods or services and not providing a level playing field for all the vendors.
Earlier, an Indian antitrust investigation found that Amazon as well as Walmart-owned Flipkart had violated local competition laws by giving preference to select sellers on their shopping websites, according to Reuters. Both refuted the charges.
In August 2024, commerce minister Piyush Goyal said Amazon’s investments in India have often been used to cover its business losses, adding that such losses "smell of predatory pricing."
Myntra generated a profit of Rs 31 crore in FY24, a sharp turnaround from a loss of Rs 782 crore in the previous year.
Revenue grew 15 per cent to Rs 5,122 crore in FY24 as the company delivered growth along with profitability.
Flipkart acquired Myntra in 2014 and Walmart bought Flipkart in 2018.