New Delhi/IBNS: The Indian government is set to summon executives from Flipkart and Amazon as part of an expanded investigation into potential violations of foreign investment regulations, according to a report by Reuters.

This development follows recent raids on sellers associated with the two e-commerce giants, which have been growing rapidly in India's Rs 70 billion e-commerce market.

The raids are a sign of increasing regulatory scrutiny on Walmart-owned Flipkart and Amazon, both of which have faced past investigations.

An earlier antitrust inquiry found that the platforms had violated rules by favouring certain sellers, a claim they have denied.

Although Amazon and Flipkart maintain that they comply with Indian laws, the Enforcement Directorate (ED) has been investigating claims for years that both companies, via selected sellers, are violating rules that prevent foreign e-commerce firms from holding inventory.

The law stipulates that foreign firms can only act as marketplaces, not as direct sellers.

After last week's raids on sellers affiliated with Amazon and Flipkart, the Enforcement Directorate (ED) intends to summon company executives and is reviewing documents seized during the operations.

Reuters reported, citing a government source, that the raids have confirmed violations of foreign investment laws.

The ED will now scrutinize business records from the sellers and examine their dealings with the platforms over the past five years, as per the report.

In terms of market share, Flipkart held 32 percent of India’s e-commerce market last year, while Amazon had 24 percent.

Together, they dominate around 8 percent of India's Rs 834 billion retail sector.

The raids followed findings from an antitrust investigation which suggested that both platforms exercised “end-to-end control” over inventory, with sellers acting as intermediaries.

At least two Amazon sellers and four Flipkart sellers were targeted in the raids.

A 2021 Reuters investigation had uncovered that Amazon, in violation of regulations, exerted significant control over the inventory of some of its top sellers.

One of the sellers raided last week, Appario, had been considered a "special" merchant by Amazon, benefiting from reduced fees and access to the platform’s global retail tools for managing inventory.

However, Appario did not respond to requests for comment.

This action comes amid increasing concerns over unfair practices in India's e-commerce industry, where smaller sellers claim to be disadvantaged.

Similar scrutiny has also affected other sectors, with India’s antitrust body recently finding that food delivery platforms Zomato and Swiggy violated laws by prioritizing certain restaurants.