The Enforcement Directorate (ED) has reportedly offered to conclude its probe into Foreign Exchange Management Act (FEMA) violations against e-commerce giant Flipkart. This closure is contingent upon Flipkart admitting to wrongdoing, paying a stipulated penalty, and dismantling its associated seller network, as reported by PTI sources. While a source indicated that the option of compounding, which allows for voluntary admission of a breach and settlement via penalty to avoid lengthy enforcement, was extended to Flipkart last week, contradictory information emerged from other ED investigation agency sources who stated no such offer had been made. An official from Flipkart, however, suggested the compounding option could bolster India's negotiating power in ongoing bilateral trade discussions with the US.

Flipkart, which had a majority stake acquired by Walmart in 2018, has been under ED scrutiny for alleged breaches of FEMA provisions and India's Foreign Direct Investment (FDI) rules. The initial show cause notice was issued in July 2021, addressing alleged violations during the period from 2009 to 2015, preceding Walmart's acquisition. A more recent notice was served to the company in April of the current year.

The allegations primarily revolve around Flipkart and Amazon India pushing aggressive discounts on their platforms to drive sales, which has drawn the attention of regulatory bodies. Amazon India is also under investigation by the ED for similar allegations related to discounts and potential competition law violations. A spokesperson for Amazon India stated they do not comment on ongoing investigations when contacted.

Adding to Flipkart's regulatory challenges, the Competition Commission of India (CCI) is independently investigating the company for alleged competition law violations. In September 2024, a non-confidential version of the CCI Director General's Investigation Report, alleging specific competition law breaches, was received by one of Flipkart's subsidiaries.