New Delhi, Oct 12: The Enforcement Directorate (ED) has offered e-commerce giant Flipkart an option to close an ongoing Foreign Exchange Management Act (FEMA) violation case by admitting its mistake and paying a penalty, sources familiar with the development said on Saturday.
According to officials, the option was extended to Flipkart last week under FEMA’s compounding provisions, which allow companies to voluntarily acknowledge contraventions and settle cases by paying a monetary penalty — thereby avoiding prolonged legal proceedings.
“ED has given the option of compounding to Flipkart. The agency has asked the company to admit its mistake, pay the applicable penalty, and dismantle the seller network associated with it,” said a source aware of the matter.
An email query sent to Flipkart remained unanswered, while a query to the Enforcement Directorate also received no response.
Meanwhile, the ED has also summoned Amazon India to verify compliance with FEMA regulations and assess the status of its ongoing operations.
When contacted, an Amazon India spokesperson declined to comment, citing the ongoing investigation.
A senior official from one of the e-commerce firms, requesting anonymity, said the compounding offer made to Flipkart could also be viewed as part of India’s strategy to strengthen its negotiating position in the bilateral trade talks with the United States.
The FEMA compounding mechanism provides companies an opportunity to settle alleged breaches of foreign exchange laws through voluntary admission and payment of fines, without facing extended enforcement actions or litigation.
Both Flipkart and Amazon India have been under ED scrutiny for alleged violations of FEMA and foreign direct investment (FDI) rules, particularly concerning business models that purportedly circumvent norms restricting multi-brand retail operations.
Authorities allege that the companies indirectly influenced product prices and offered deep discounts on their platforms to boost sales — practices seen as inconsistent with India’s FDI framework for e-commerce.
The ED first issued a show-cause notice to Flipkart, its related entities, and certain individuals in July 2021, asking why action should not be initiated under FEMA for alleged violations between 2009 and 2015 — a period before US retail major Walmart acquired a majority stake in Flipkart in 2018.
Since then, the probe has expanded to cover Flipkart’s operations post-acquisition, with the most recent notice issued in April 2025 seeking additional details about its business conduct after 2016.
Separately, the Competition Commission of India (CCI) is also investigating competition law violations involving certain Flipkart subsidiaries and associated entities.
In September 2024, a non-confidential version of the CCI Director General’s Investigation Report was shared with one of Flipkart’s subsidiaries, outlining alleged anti-competitive practices.
While the ED’s latest offer of compounding provides Flipkart a possible route to close one of its long-running regulatory battles, the company still faces multiple probes — both under economic and competition laws — that continue to cast a shadow over India’s fast-growing e-commerce landscape.
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