India Steps Up E-Commerce Regulations with $200M Legal Action Against Walmart’s Fashion Unit, Myntra

India’s financial crime regulatory body has filed a complaint against Myntra, the fashion e-commerce leader backed by Walmart, alleging that the company violated foreign investment laws by channeling over $191 million through a related-party scheme that falsely categorized retail operations as wholesale transactions.

This move represents the latest initiative in a broader crackdown by Indian authorities, who have previously scrutinized firms such as Amazon and Flipkart.

On Wednesday, the Enforcement Directorate revealed that the Bengaluru-based online retail company breached the Foreign Exchange Management Act (FEMA) by conducting multi-brand retail trade “under the pretense of wholesale cash and carry,” using a related entity, Vector E-Commerce, as an intermediary to channel retail sales through a wholesale model.

India restricts foreign entities in the wholesale sector from selling directly to consumers to protect local retailers. The legislation also limits sales to related group companies to a maximum of 25%.

According to the agency, Myntra did not meet the criteria to operate as a wholesale or cash-and-carry entity since all its sales were solely directed to Vector E-Commerce (PDF).

The complaint has been lodged against Myntra, its associated entities, and their directors under section 16(3) of the FEMA, 1999.

Myntra holds about half of India’s entire fashion e-commerce market. The company is also progressively enhancing its quick-commerce services and diversifying into high-growth sectors such as home and living, in addition to beauty. Moreover, it is delving into social commerce by partnering with celebrities and recruiting micro-influencers to compete with platforms like Instagram, YouTube, and Amazon Live.

This complaint arises as Indian officials hold talks with the Trump administration regarding a potential trade agreement with the United States.

Reports suggest that the Modi government in New Delhi is facing pressure from the Trump administration to grant Amazon and Flipkart unfettered access to its $125 billion e-commerce market. Although the Modi administration was anticipated to release its e-commerce policy, sources have indicated to TechCrunch that it has been postponed, with officials wary of straining ties with the U.S. government.

Nonetheless, Amazon and Flipkart have encountered scrutiny from Indian regulatory bodies, including the Enforcement Directorate. A notable recent action involved a raid in November on the offices of some of their sellers, who were accused of infringing foreign investment regulations. In April, the agency also requested sales data and other documentation from smartphone manufacturers like Apple and Xiaomi as part of an investigation into Amazon and Flipkart.

In light of the developments, Myntra stated that they have not yet received a copy of the complaint and associated documents from authorities but are “fully committed to cooperating with them at any time.”

“At Myntra, we are profoundly committed to complying with all applicable laws and upholding the highest standards of integrity and compliance,” commented a company spokesperson.

Founded in 2007, Myntra was acquired by Flipkart in 2014 and subsequently purchased by Walmart as part of Flipkart’s $1.6 billion acquisition in 2018.

When reached for comment, a Walmart spokesperson referred to Myntra’s statement.