Amazon's retail practices in India under ED lens

Enforcement Directorate is looking into whether Amazon India may have sold directly to customers

Indian regulators are investigating whether Amazon.com might have circumvented restrictions placed on foreign investors by selling directly to domestic consumers, the Wall Street Journal on Friday cited unidentified sources as saying.

The finance ministry’s Enforcement Directorate is looking into whether Amazon’s Indian subsidiary may have sold directly to customers but made it look as if the sales were made by other companies, the Journal cited two people familiar with the matter as saying.

India doesn’t allow foreign firms to own majority stakes in retail companies that sell more than one brand. Amazon is allowed 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.