Flipkart and Amazon to Respond ED’s $1.35B Fine Notice for Violating Laws!

The major eCommerce Indian player, Flipkart, has been issued a ‘show cause notice’ from the Indian regulatory authority, ED, in connection with the over violation of some foreign investment laws, which might result in a fine of 100 billion rupees ($1.35 billion).

Reportedly, Sachin Bansal and Binny Bansal, the founders of Flipkart, have also been roped into the notice. Walmart owned Flipkart, which has been facing a tough phase, and antitrust investigations in the country needed to explain for alleged violation of foreign investment laws. 

The development came in light of the ongoing investigating case by the ED on eCommerce players, including Flipkart and Amazon, for years for violating the country’s laws that regulate multi-brand retail and limits companies to operate in a marketplace for sellers. Previously, Karnataka high court permitted CCI to investigate Amazon and Flipkart for violating the provision of competition act.  The ED official pointed out that the investigation showed that Flipkart used foreign investment and a related party, WS Retail, and sold the products to consumers on its shopping website, which is considered a violation of the land law.

Resultantly, the company has been issued a” show cause notice” in early July. It also named Sachin Bansal and Binny Bansal as well as current investor Tiger Global and instructions have been given to submit their replies on why they should not face a fine of 100 billion rupees for their conduct, confirmed a source from the agency.

According to a Flipkart spokesperson, the company is “in compliance with Indian laws and regulations.”

The company adheres to its full cooperation and support with the authorities as they investigate the period 2009-2015, added the spokesperson.

However, no public notices have been issued to parties during an investigation. Sources reported that the company and others have 90 days to respond to the notice where WS Retail stopped operations at the end of 2015.

When contacted, Tiger Global declined to comment on the notice. Binny Bansal and Sachin Bansal also denied responding on this matter; The ED also didn’t comment on the notice outside the regular business hours.

Flipkart sold the majority of its stake to Walmart for $16 billion in 2018 in one of the historic eCommerce deals in the Indian eCommerce industry. Moreover, Flipkart’s valuation rose to double to $37.6 billion in less than three years at a $3.6 billion funding round in July, before SoftBank Group reinvested ahead of its market debut.

Eventually, eCommerce companies such as Amazon and Flipkart face difficulties in antitrust and restriction investigations carried on by the CCI in concerns with the complaints raised by the smaller sellers. The case is pending as it is being heard at the highest court of the country.