India’s financial crime-fighting agency, the Enforcement Directorate (ED), has stepped up its investigation into Amazon and Walmart-owned Flipkart, drawing major smartphone players like Apple and Xiaomi into the spotlight. The agency has requested detailed data and contracts related to online sales, indicating the probe is entering a deeper phase of scrutiny.
Credits: Communications Today
A Marketplace Model Under Fire
India’s Foreign Direct Investment (FDI) regulation, which prohibits foreign-owned e-commerce platforms from managing inventory or influencing product pricing, is at the center of the inquiry. Rather, businesses like Amazon and Flipkart are meant to function as impartial marketplaces that merely link customers and sellers.
But according to people familiar with the situation, the ED thinks both businesses may have violated these regulations by controlling vendors excessively, especially in the expensive smartphone market.
Phone Makers Caught in the Crossfire
In recent weeks, the ED reportedly reached out to major smartphone manufacturers — including Apple, Xiaomi, and others — seeking online sales data and financial agreements with Amazon and Flipkart. The aim? To uncover if these e-commerce giants were dictating terms, influencing inventory, or participating in exclusive arrangements that violate the law.
One industry source confirmed that Apple received the agency’s directive in March, while Xiaomi declined to comment on the ongoing investigation.
Despite being pulled into the probe, a senior Indian government official clarified that the smartphone brands are not under direct accusation. Their data is being sought as part of the broader investigation into the marketplaces. “Eventually if there’s wrongdoing, there will be monetary penalties on the e-commerce companies,” the official stated.
Big Stakes in a Booming Market
This investigation comes at a critical time. India’s e-retail market is expected to surge from $57-60 billion in 2023 to over $160 billion by 2028, according to Bain & Company. Smartphones, one of the biggest online-selling categories, make up a substantial chunk of this growth.
Recent data from Counterpoint Research shows that Xiaomi and Samsung together held a 33% share of the Indian market in 2024, while Apple captured 7%. With nearly 40% of all smartphones sold online, the investigation could disrupt the very backbone of e-commerce-led sales strategies for global brands.
Longstanding Concerns, Fresh Momentum
The ED’s investigation isn’t new. Amazon and Flipkart have been under scrutiny for several years, facing accusations from Indian traders’ associations for allegedly giving undue advantage to a few sellers, driving local businesses into losses through steep online discounts and exclusive launches.
A 2021 Reuters investigation revealed internal Amazon documents that showed the company had exerted significant control over the inventory of some top sellers. Amazon denied any wrongdoing at the time.
Moreover, India’s antitrust regulator last year concluded that both Amazon and Flipkart had breached competition laws by favoring certain sellers and engaging in collusive deals with top smartphone makers for online-exclusive product launches. That case is still ongoing.
E-Commerce in the Crosshairs of Trade Talks
Interestingly, this heightened regulatory action coincides with the India-U.S. trade negotiations, where e-commerce regulations have been a contentious topic. The U.S. has been pushing India to liberalize its e-commerce sector, accusing it of protectionism.
While the Indian government has resisted major policy changes, this investigation into Amazon and Flipkart could serve as a warning shot — both to foreign firms and to local brands partnering with them.
Credits: Deccan Herald
What Lies Ahead
Legal experts predict that Amazon and Flipkart may face financial penalties or enforcement proceedings as the ED continues to collect information from phone manufacturers. This may force Apple, Xiaomi, and other smartphone manufacturers to reconsider their online marketing plans in one of the fastest-growing marketplaces in the world.
It remains to be seen if this probe leads to historic regulatory action or if diplomatic pressure causes it to end, but the message is clear: India is no longer satisfied with taking a backseat role in its own digital economy.
