India Expands Its E-commerce Crackdown With A New $200m Case Against Walmart’s Fashion Arm Myntra

India’s financial crime watchdog has revenge a title against Walmart-backed manner e-commerce elephantine Myntra, alleging nan institution violated overseas finance rules by channeling complete $191 cardinal done a related-party strategy that disguised unit operations arsenic wholesale trade.

This title marks nan latest move successful a broader crackdown by Indian authorities, which antecedently targeted Amazon and Flipkart.

On Wednesday, nan Enforcement Directorate said nan Bengaluru-based manner e-commerce patient violated nan Foreign Exchange Management Act, known arsenic FEMA, by engaging successful multi-brand unit trading “under nan guise of wholesale rate and carry,” utilizing a related entity, Vector E-Commerce, arsenic an intermediary to way unit income done a wholesale structure.

India restricts overseas companies engaged successful wholesale business from making nonstop income to consumers successful an effort to protect section retailers. The rule besides limits income to related group companies to a maximum of 25%.

Myntra grounded to meet nan conditions for operating arsenic a wholesale aliases cash-and-carry business, arsenic each of its income were made exclusively to Vector E-Commerce, nan agency stated (PDF).

The agency revenge nan title against Myntra, its related companies, and their board nether conception 16(3) of nan FEMA, 1999.

Myntra controls astir half of nan country’s wide manner e-commerce market. The institution is besides gradually expanding its speedy commerce service and broadening its scope successful high-growth categories, including location and living, arsenic good arsenic beauty. The institution is besides testing nan waters successful societal commerce by partnering pinch celebrities and bringing connected micro-influencers, taking connected nan likes of Instagram, YouTube, and Amazon’s Live.

The title comes arsenic Indian officials hold talks pinch nan Trump administration complete a imaginable waste and acquisition woody pinch nan United States.

The Modi authorities successful New Delhi is reportedly under unit from nan Trump administration to assistance Amazon and Walmart-owned Flipkart afloat entree to its $125 cardinal e-commerce market. The Modi authorities has agelong been expected to merchandise its e-commerce policy, but sources antecedently told TechCrunch that it has been connected nan backmost burner, arsenic officials are cautious not to strain relations pinch nan U.S. government.

Nonetheless, Amazon and Flipkart person antecedently faced investigations by Indian agencies, including nan Enforcement Directorate. One of nan caller awesome actions against nan 2 companies was reportedly a raid by nan national agency successful November connected nan offices of immoderate of their sellers, who are accused of violating nan country’s overseas finance rules. In April, nan agency besides privately sought income information and different documents from smartphone vendors, including Apple and Xiaomi, arsenic portion of its probe into Amazon and Flipkart.

Responding to nan latest action, Myntra stated that it had not received a transcript of nan title and supporting documents from nan authorities but remained “fully committed to cooperating pinch them astatine immoderate constituent of time.”

“At Myntra, we are profoundly committed to upholding each applicable laws of nan onshore and operating pinch nan highest standards of compliance and integrity,” a institution spokesperson said.

Founded successful 2007, Myntra was acquired by nan Indian e-commerce elephantine Flipkart successful 2014 and was later bought by Walmart as portion of Flipkart’s $1.6 cardinal acquisition successful 2018.

When contacted, a Walmart spokesperson pointed to nan connection issued by Myntra.