India probes Myntra for violating foreign investment rules

INDIA's financial crime agency said on Wednesday (23) it was investigating Walmart's fashion business Myntra Designs for allegedly breaching laws prohibiting foreign wholesalers from selling to consumers.

The case comes amid growing scrutiny of e-commerce players in India. An antitrust investigation last year found Amazon and Walmart's other e-commerce platform, Flipkart, favoured select sellers and resorted to "predatory pricing", hurting smaller retailers. The companies denied the allegations.

Myntra, owned by Flipkart, sells fashion brands on its own e-commerce website.

Detailing its findings from an investigation, India's Enforcement Directorate said that Myntra declared it was a wholesaler and received $192 million (£149m) of foreign investment, but then sold most of its goods to a group entity that retailed those products to consumers.

"Myntra Designs Pvt. Ltd was actually carrying out multi-brand retail trading in the guise of wholesale cash & carry," the agency said.

Myntra said in a statement that it had not received documents related to the case from the authorities but that it remained "fully committed to cooperating with them at any point of time".

Walmart did not immediately respond to a request for comment.

In a bid to protect domestic retailers and traders, India prohibits foreign companies engaging in wholesale business to make any direct sales to consumers.

E-commerce business is also restricted, with foreign-owned companies like Myntra, Amazon and Flipkart allowed to operate marketplaces to connect buyers and individual sellers online, but not to stock goods or offer them directly to consumers.

The Enforcement Directorate said it had filed a complaint against Myntra before an adjudicating authority, without giving details.

Flipkart and Amazon have also faced allegations of breaching India's foreign investment rules.

A 2021 Reuters investigation based on internal Amazon documents showed the company for years gave preferential treatment to small groups of sellers, and used them to bypass Indian laws. Amazon has denied wrongdoing.

Amazon and Flipkart are leading players in India's e-commerce market, which was estimated to be worth $125 billion (£97.5bn) in 2024 and is set to top $345bn (£269bn) by 2030, according to India Brand Equity Foundation.

Founded in 2007, Bengaluru-based Myntra was acquired by Flipkart in 2014. Walmart bought a controlling stake in Flipkart in 2018 for £12.5bn.

Myntra reported revenues of nearly £468m in 2023-24, up 15 per cent on the previous year.

(Reuters)