The ED's response came on a PIL which has alleged that the e-commerce giants were violating foreign direct investment (FDI) norms.
The court had earlier sought response of the Centre, Amazon and Flipkart to the plea which has sought a probe into the alleged FDI violations.
The ED, in its reply filed through central government standing counsel Amit Mahajan, said the "department has already registered and initiated investigation under the provisions of Foreign Exchange Management Act (FEMA) against the two companies to ascertain whether they have been contravening any provisions of FEMA or contravening any rule, regulations, notification, direction or order issued in exercise of the powers under FEMA...."
It also sought dismissal of the petition.
The petition has contended that according to Press Note 3 of 2016, which regulates FDI in e-commerce, entities like Amazon and Flipkart are not to exercise ownership over stock, nor directly or indirectly influence price of goods and services sold on their marketplace.
It has claimed that by creating name lending companies, Amazon and Flipkart buy branded goods in bulk at discounts from manufacturers and render small sellers uncompetitive by a wide margin, thus influencing the prices in violation of the FDI norms.
"As a consequence of this FDI norms violation, smaller sellers are unable to participate in the fast growing e-commerce sector," the plea has contended and added that due to subsidized prices on such platforms, small sellers are unable to sell in the brick-n-mortar world too.
Apart from that the plea has also claimed that the two e-commerce giants have created several other group companies in the chain to divide discounts and losses.
"Exchange offers, EMI costs and bank offers are funded completely or substantially by Amazon and Flipkart and constitute a clear influence on price in violation of FDI norms," it alleged.