ED offers Flipkart to settle FEMA case via compounding

The Enforcement Directorate (ED) has reportedly offered e-commerce major Flipkart an option to settle its ongoing Foreign Exchange Management Act (FEMA) violation case through compounding, according to a report by the Press Trust of India (PTI). 

The move could potentially bring closure to a years-long investigation into alleged FDI breaches in India’s e-commerce sector.

As per the report, the ED has proposed that Flipkart admit to certain procedural lapses, pay a monetary penalty, and dismantle the seller network linked to the alleged violations. If accepted, this compounding offer would allow the Walmart-owned company to resolve the matter without undergoing a lengthy enforcement process.

The probe, initiated several years ago, focuses on potential contraventions of FEMA norms concerning how Flipkart structured its seller ecosystem and managed inventory areas that have long been contentious under India’s FDI rules for e-commerce marketplaces. The case also covers transactions that occurred before Walmart acquired Flipkart in 2018.

While the ED has not issued an official statement. However, some ED officials reportedly denied that a formal compounding offer had been extended, suggesting that discussions are still at a preliminary stage.

The Competition Commission of India (CCI) is also conducting an investigation against Flipkart regarding alleged competition law violations by certain subsidiaries and other parties in India. In September 2024, a non-confidential version of the CCI DG’s investigation report was received by one of Flipkart’s subsidiaries, highlighting potential competition law violations

Amazon India, which is under similar scrutiny for alleged FEMA violations, remains on the ED’s radar, though no formal compounding proposal has been confirmed for the company.

Queries sent to Flipkart and Amazon remained unanswered till the time of publishing. The story will be updated once the companies respond.

If Flipkart goes ahead with the compounding option, it could become a benchmark for other global and domestic companies dealing with India’s stricter FDI rules.