The option was given by ED to Flipkart last week under the compounding rules of FEMA (Foreign Exchange Management Act).
“ED has given the option of compounding to Flipkart. ED has asked Flipkart to admit its mistake, pay a penalty and dismantle the seller network associated with it,” a source told PTI.
Details of the the case
Both Flipkart and Amazon India have been under ED scrutiny for alleged breach of FEMA provisions, specifically regarding allegations of pushing discounts on their platforms to boost sales.
The ED had also summoned Amazon India to check the status of the company, PTI reported.
Why was the option given?
An official of one of the e-commerce firms also told PTI that ED’s compounding offer to Flipkart might be intended to strengthen India’s negotiating power during ongoing bilateral trade negotiation with the US.
The compounding rule allows companies to voluntarily admit breach of the provision under the FEMA and settle the case by paying a penalty, avoiding lengthy enforcement actions.
CCI investigation
In addition to the FEMA scrutiny, Flipkart is also facing an investigation by the Competition Commission of India (CCI) into alleged competition law violations by certain subsidiaries of the company in India and other parties.
In September 2024, one of the Flipkart subsidiaries received a non-confidential version of the CCI DG’s Investigation Report, which alleged certain competition law violations, PTI reported.
