Flipkart-owned fashion platform Myntra has come under scrutiny from the Enforcement Directorate for alleged violations of India foreign direct investment rules. The agency has launched an investigation into transactions valued at over ₹1654 crore. Raising fresh concerns about regulatory compliance in the booming e-commerce sector.
FDI Rules Trigger the Investigation
According to sources familiar with the case, the Enforcement Directorate is examining whether Myntra engaged in business practices. That bypass India strict FDI norms in multi-brand retail. Under current rules, foreign investment in inventory-based retailing is prohibited. E-commerce firms are only allowed to operate as marketplaces that connect third-party sellers with customers.
Officials allege that Myntra may have structured its operations in a way that effectively allowed it to control inventory. And influence pricing something that breaches the conditions of permitted FDI. If proven, this would place the platform in direct violation of the Foreign Exchange Management Act (FEMA), which regulates all cross-border financial dealings.
Flipkart Connection Under Watch
The case has drawn attention partly because Myntra is part of the Flipkart Group, which was acquired by US-based retail giant Walmart. This foreign ownership brings added scrutiny under India FDI policy. Especially given that Flipkart has faced similar allegations in the past.
Investigators are reviewing Myntra business agreements, seller relationships, and ownership structures. To determine if there was any indirect control over product inventories. The ED is also looking into whether Myntra offered preferential treatment to certain vendors that were either related parties or heavily dependent on the platform for sales.
Broader Impact on E-commerce Giants
This probe is not isolated. In recent years, multiple global and domestic platforms operating in India have been questioned for possibly skirting FDI rules using layered corporate setups. Industry experts believe that this case could lead to tighter regulatory enforcement and trigger internal audits across e-commerce firms. The Ministry of Commerce had earlier issued clarifications and policy updates to plug gaps in the existing framework. But compliance loopholes remain, especially when it comes to backend control and seller affiliations. The final outcome of the investigation is still pending, but the signals are clear. Authorities are ramping up oversight, and platforms operating in grey zones may no longer get the benefit of ambiguity.
Myntra has not yet issued an official statement. But the case now raises serious questions about how foreign-backed e-commerce firms structure their Indian operations, and how much longer regulatory tolerance will hold.
