ED to probe Flipkart, Walmart
By ENS Economic Bureau | Published: 05th December 2012 10:47 AM |
With allegations of violation of FDI regulations against online shopping company Flipkart and cash-and-carry major Bharti Walmart Private Ltd, the government on Tuesday said the Enforcement Directorate (ED) has been asked to investigate flouting of rules by these companies.
“References alleging that some companies are carrying out activities in violation of the FDI policy in retail market have been received,” Commerce and Industry Minister Anand Sharma said in the Lok Sabha.
The RBI has informed that matters related to Bharti Wal-Mart Cedar Support Services Ltd and Flipkart Online Services respectively have been referred to the ED for further investigations, he added.
Violation of FDI norms is covered by the penal provision of the Foreign Exchange Management Act, 1999. Flipkart is under the ED’s scanner for allegedly flouting rules which allow e-commerce companies with foreign investment to carry out only business-to-business transactions but not business-to-consumer transactions by creating complex structures that may not be permissible.
As per rules, e-commerce companies with foreign investments are allowed to do wholesale trading with business-to-consumer companies that are unrelated and can do wholesale trading with a group company only if it does not exceed 25 per cent of its total turnover and is used for internal consumption. Walmart had invested $100 million (around `456 crore) in Cedar Support Services, which was earlier known as Bharti Retail Holdings Ltd.