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ED investigating Amazon for possible FDI violations

Online retailer Amazon India has come under Enforcement Directorate (ED) scanner for possibly violating the FDI rules of the country, reports Economic Times. The ED suspects that Amazon has been selling directly to customers under the radar, by making it appear like genuine sales on behalf of vendors. It also suspects the online retailer of manipulating and controlling prices on its website. Currently, India does not allow FDI in multi-brand retail, instead Amazon works by acting as a marketplace for vendors to sell goods, then charges the third-party suppliers commissions based on products sold. The accusations of direct selling and price fixing would imply Amazon acting as a retailer, rather than just a marketplace, violating India’s FDI policy. The ED is still trying to establish if there has indeed been a violation, meanwhile Amazon itself has refused to comment on the development. Previously the Reserve Bank of India had initiated the probe into business models of a few e-commerce companies by sending a reference probe to ED, which then began investigating companies with similar business models. As per FEMA norms, a penalty up to three times of the foreign investment or contravention received, can be imposed by the ED. Ecommerce venture Flipkart had a similar run in with the ED when it received a notice alleging violation of Rs 1,400 crore under FEMA, from the authority in May. Amazon has also been accused by the commercial taxes department of Karnataka of making a back-door entry in India rather than opening its own…

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