India has ramped up regulatory scrutiny on major global e-commerce platforms, including Amazon, Walmart’s Flipkart, and Myntra, as authorities seek to enforce longstanding restrictions on foreign investment and marketplace conduct. At the heart of the matter lies India’s policy that prohibits foreign-owned digital retailers from selling goods directly to consumers. Instead, these firms are required to operate as neutral marketplaces connecting buyers with third-party sellers. However, recent investigations suggest that leading platforms may have circumvented these rules by creating complex ownership structures or engaging in preferential practices that distort market competition.
The Indian Enforcement Directorate (ED) and the Competition Commission of India (CCI) are leading a multi-pronged effort targeting both compliance with foreign direct investment (FDI) regulations and anti-competitive conduct. These investigations have gained momentum as India’s e-commerce market grows rapidly, projected to exceed 345 billion USD by 2030, drawing intense global interest and domestic political attention.
Walmart’s Myntra Investigated Over Investment Violations
Myntra, a fashion-focused platform owned by Walmart, has come under the spotlight for allegedly violating FDI norms. According to Indian authorities, Myntra received about 192 million USD in foreign investment while registered as a wholesale operator. However, investigators claim that Myntra effectively operated as a direct-to-consumer retailer by selling products to a sister company, which then listed those items on Myntra’s own platform.
This arrangement is viewed by regulators as a potential breach of India’s FDI framework, which prohibits foreign-funded wholesale entities from engaging in direct retail. The ED has opened formal proceedings against Myntra and could pursue financial penalties or structural changes. Although Myntra has yet to receive a formal notice of violation, the company has stated it will fully cooperate with authorities.
This case adds to a growing list of foreign companies facing friction with India’s unique regulatory model. Government officials argue that these restrictions are vital for safeguarding small domestic businesses and ensuring fair competition in a market where global players have significant technological and financial advantages.
Amazon and Flipkart Accused of Market Distortion
In parallel, Amazon and Flipkart are being investigated by the CCI for anti-competitive practices. A confidential government report from 2024 accused both firms of manipulating their search algorithms to promote preferred sellers, engaging in exclusive partnerships with smartphone manufacturers, and undercutting rivals through aggressive discounting strategies.
The report, based on thousands of pages of internal documents, alleges that Amazon and Flipkart coordinated with brands such as Samsung and Xiaomi to launch products exclusively on their platforms, sidelining other retailers. These tactics, according to the CCI, undermine fair market access and hurt smaller vendors by reducing their visibility and sales potential.
Further enforcement action came in March 2025, when authorities raided Amazon and Flipkart warehouses in Delhi, seizing unlicensed goods that lacked required quality certification marks. The move was part of a broader campaign to ensure compliance with product safety regulations and highlight the risks of unauthorized imports.
In addition to antitrust and product safety concerns, both Amazon and Flipkart are facing ongoing scrutiny under FDI rules, including a potential cumulative penalty of over 1.3 billion USD Regulatory sources say formal charges may be filed later this year, depending on the companies’ responses and corrective measures.
Wider Implications Amid Trade and Market Growth
India’s tougher stance on foreign digital platforms extends beyond e-commerce. Food delivery companies such as Zomato, Swiggy, and Zepto are also under investigation for allegedly favoring select restaurants and using deep-discounting to dominate smaller players. These actions are part of a broader push to assert digital sovereignty and regulate platform economies in the interest of domestic stakeholders.
The growing regulatory momentum also intersects with India’s ongoing trade dialogue with the United States, where digital market access and investment barriers have become contentious topics. Washington has repeatedly criticized India’s e-commerce restrictions as protectionist and detrimental to free trade. Indian officials, in turn, maintain that their policies are essential for preserving competition and consumer welfare.
Industry observers note that these enforcement actions could reshape the digital retail landscape in India. Potential penalties, structural mandates, or court rulings may force companies like Amazon and Walmart to rethink their operational models. At the same time, investors are closely watching how India balances foreign interest with domestic regulatory priorities in one of the world’s most dynamic e-commerce environments.