New Delhi: The Enforcement Directorate told the Delhi High Court that it was investigating whether e-commerce giants Amazon and Flipkart violated provisions of foreign exchange law.

The ED’s response came on a PIL, which alleged that the e-commerce giants were violating foreign direct investment (FDI) norms.

The matter is scheduled to come up for hearing before a bench of Chief Justice Rajendra Menon and Justice V K Rao on November 19.

The court had earlier sought response of the Centre, Amazon and Flipkart to the plea, which sought a probe into the alleged FDI violations.

The ED, in its reply filed through central government standing counsel Amit Mahajan, said the “department had already registered and initiated investigation under the provisions of Foreign Exchange Management Act (FEMA) against the two companies to ascertain whether they were contravening any provisions of FEMA or contravening any rule, regulations, notification, direction or order issued in exercise of the powers under FEMA...." It also sought dismissal of the petition.

The petition by an NGO, Telecom Watchdog, also asked for initiation of legal proceedings against the two e-commerce giants under the FEMA for alleged violation and circumvention of FDI norms.

The plea, filed through advocate Pranav Sachdeva, has claimed that Amazon and Flipkart have created multiple entities to circumvent the FDI norms and route the hot-selling stock at cheaper rates.

The petition contended that according to Press Note 3 of 2016, which regulates FDI in e-commerce, entities such as Amazon and Flipkart were not to exercise ownership over stock, nor directly or indirectly influence price of goods and services sold on their marketplace.

It also claimed that by creating name lending companies, Amazon and Flipkart bought branded goods in bulk at discounts from manufacturers and render small sellers uncompetitive by a wide margin, thus influencing the prices in violation of the FDI norms.

“As a consequence of the violation in FDI norms, smaller sellers are unable to participate in the fast growing e-commerce sector," according to the plea. Due to subsidised prices on such platforms, small sellers were unable to sell in the brick-n-mortar world too, he added.

Apart from that the plea also claimed that the two e-commerce giants were created several other group companies in the chain to divide discounts and losses.

“Exchange offers, EMI costs and bank offers were funded completely or substantially by Amazon and Flipkart and constituted a clear influence on price in violation of FDI norms," it alleged.

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