India expands its e-commerce crackdown with a new $200M case against Walmart’s fashion arm Myntra
India’s financial crime watchdog, the Enforcement Directorate (ED), has filed a significant complaint against Myntra, the Walmart-backed fashion e-commerce giant. The complaint alleges that Myntra violated foreign investment rules by illicitly channeling over $191 million through a convoluted related-party scheme, effectively disguising its retail operations as wholesale trade. This action marks a notable escalation in India’s ongoing crackdown on major e-commerce players, following previous investigations into industry titans like Amazon and Flipkart.
On Wednesday, the Enforcement Directorate stated that the Bengaluru-based firm contravened the Foreign Exchange Management Act (FEMA). Myntra is accused of engaging in multi-brand retail trading “under the guise of wholesale cash and carry,” specifically by using a related entity, Vector E-Commerce, as an intermediary to funnel retail sales through a wholesale structure. This arrangement, according to the ED, allowed Myntra to circumvent strict regulations.
India’s foreign investment laws are designed to protect local retailers by restricting foreign companies operating in wholesale businesses from making direct sales to consumers. Furthermore, the law caps sales to related group companies at a maximum of 25%. The agency explicitly stated that Myntra failed to adhere to the conditions for operating as a wholesale or cash-and-carry business, given that all its sales were made exclusively to Vector E-Commerce. The complaint against Myntra, its related companies, and their directors was filed under section 16(3) of the FEMA, 1999.
This latest legal challenge comes amidst broader scrutiny from Indian authorities. Both Amazon and Flipkart have previously faced investigations by Indian agencies, including the Enforcement Directorate. Recent actions include a federal agency raid in November on offices of some sellers utilizing Amazon and Flipkart platforms, accused of violating foreign investment norms. Additionally, in April, the ED reportedly sought sales data and other documents from smartphone vendors, including Apple and Xiaomi, as part of its ongoing probe into Amazon and Flipkart’s operations.
Myntra holds a significant position, controlling approximately half of India’s overall fashion e-commerce market. The company has also been expanding its quick-commerce service, broadening its reach into high-growth categories such as home and living, and beauty. Furthermore, Myntra has been exploring social commerce, engaging in partnerships with celebrities and micro-influencers to boost content-led commerce, entering a space also occupied by platforms like Instagram, YouTube, and Amazon’s Live.
The timing of this complaint is particularly noteworthy as Indian officials are engaged in discussions with the U.S. government regarding a potential trade deal. Reports suggest the Modi government in New Delhi is under pressure from the Trump administration to grant full access to its substantial $125 billion e-commerce market to companies like Amazon and Walmart-owned Flipkart. The long-awaited national e-commerce policy has reportedly been on hold, with officials cautious about straining relations with the U.S.
In response to the complaint, Myntra issued a statement indicating it had not yet received a copy of the complaint or supporting documents from the authorities. However, a company spokesperson affirmed Myntra’s full commitment to cooperation, stating, “At Myntra, we are deeply committed to upholding all applicable laws of the land and operating with the highest standards of compliance and integrity.” When contacted, a Walmart spokesperson referred back to Myntra’s statement.
Founded in 2007, Myntra was acquired by Indian e-commerce giant Flipkart in 2014. Subsequently, Walmart acquired Myntra as part of its $1.6 billion acquisition of Flipkart in 2018.
