SAN FRANCISCO (Reuters) - Regulators in India are investigating whether Amazon.com Inc may have circumvented restrictions placed on foreign investors by selling directly to domestic consumers, The Wall Street Journal on Friday, citing unidentified sources.
The Indian Finance Ministry’s Enforcement Directorate is looking into whether Amazon.com’s local subsidiary may have sold directly to customers, but made it look as if the sales were made by other companies, the Journal report said, quoting two people familiar with the matter.
India does not allow foreign firms to own majority stakes in retail companies that sell more than one brand. Amazon.com is allowed to operate there because it acts as a marketplace rather than a retailer, according to the Journal.
Amazon was not immediately available for comment.
The Seattle-based e-commerce company makes its money in India by charging third-party suppliers to use its website to sell some 17 million different products, from books to electronics. Asia’s second-largest country is seen as strategically important to Amazon as it tries to ramp up growth and profits.
Amazon.com has said it plans to invest $2 billion more in India, where it has slashed prices, ramped up marketing and accelerated warehouse construction to try and take on local competitors.
Indian investigators are also examining whether Amazon exerts control over the prices of products sold on its website, one of the Journal story’s sources said.
“An ideal marketplace should not have any interference from the platform operator,” the newspaper cited the person as saying.
Amazon.com shares dipped into negative territory in afternoon trading, down 65 cents at $345.30.
Reporting by Edwin Chan; editing by G Crosse and Meredith Mazzilli