Tue. Oct 19th, 2021

© Reuters. FILE PHOTO: The shopping cart for small toys is seen in front of the Flipkart logo that appears in this illustration of July 30, 2021. REUTERS / Dado Ruvic / Illustration

By Aditya Kalra, Aftab Ahmed and Sanjeev Miglani

NEW DELHI (Reuters) – India’s financial crime agency has asked Walmart’s Flipkart (NYSE 🙂 and its founders to explain why they should not face a $ 1.35 billion fine for alleged violation of foreign investment laws, three sources and an agency told an official to Reuters.

The App Management Agency has been investigating e-commerce giants Flipkart and Amazon.com Inc. (NASDAQ 🙂 for years for allegedly bypassing foreign investment laws that strictly regulate and restrict multi-brand retail. companies to operate a market for sellers.

The Enforcement Directorate official, who declined to be named, said the case concerned an investigation into allegations that Flipkart attracted foreign investment and a related party, WS Retail, which then sold goods to consumers in the your shopping website, which was prohibited by law.

In early July, the agency’s office in the southern city of Chennai sent Flipkart, its founders Sachin Bansal and Binny Bansal, as well as current investor Tiger Global, to the so-called “just cause notice” “, to explain why they should not face a fine. of 100 billion rupees ($ 1.35 billion) per slip, said the agency official and sources, who are familiar with the content of the notice.

A Flipkart spokesman said the company “complies with Indian laws and regulations”.

“We will cooperate with the authorities as they discuss this issue relating to the period 2009-2015 according to their notice,” the spokesman added.

The Indian agency does not make public these warnings issued to the parties during an investigation.

One source said Flipkart and others have about 90 days to respond to the warning. WS Retail ceased operations in late 2015, the person added.

Tiger Global declined to comment. Binny Bansal and Sachin Bansal did not immediately respond to requests for comment. The Directorate of Application also did not respond outside normal hours.

Walmart acquired a majority stake in Flipkart for $ 16 billion in 2018, its largest deal in history. Sachin Bansal sold its stake in Walmart at the time, while Binny Bansal retained a small stake. Walmart did not respond to any requests for comment.

Flipkart’s valuation doubled to $ 37.6 billion in less than 3 years, with a $ 3.6 billion round of financing in July, during which SoftBank Group reinvested in the company before an expected market debut.

The warning is the latest headache from any online retailer regulator, which is already facing tougher restrictions and antitrust investigations in India and a growing number of complaints from smaller sellers.

Retailers in India claim that Amazon and Flipkart favor select sellers of their platforms and that they use complex trading structures to circumvent foreign investment laws, to the detriment of smaller players. Companies deny any wrongdoing.

In February, a Reuters investigation https://www.reuters.com/investigates/special-report/amazon-india-operation based on Amazon documents showed that it had given preferential treatment for years to a small group of sellers , with false public relations with those used to circumvent Indian law. Amazon says it does not give preferential treatment to any seller.

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