India's $200M Myntra Crackdown: What It Means for Walmart and E-Commerce in 2025
India’s crackdown on foreign-funded e-commerce platforms just got a major update. On July 23, 2025, the Enforcement Directorate (ED) filed a complaint against Myntra, Walmart’s fashion e-commerce arm in India, accusing it of violating the Foreign Exchange Management Act (FEMA). At the center of the case is an alleged $191 million scheme that disguised retail operations as wholesale trade, which goes against India’s strict foreign investment norms. This move is part of India’s ongoing effort to tighten control over how foreign-backed companies do business online and protect small domestic retailers from unfair competition.
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Myntra FEMA Crackdown: The Alleged Violations Explained
According to the Enforcement Directorate, Myntra sidestepped India's foreign investment rules by channeling retail sales through a related-party intermediary—Vector E-Commerce. This setup allowed the company to appear compliant on paper, operating as a wholesale or "cash-and-carry" business, while in reality functioning as a direct-to-consumer retailer. Under FEMA, foreign-owned businesses in India are permitted to operate wholesale models, but there are strict limits on retail activities and sales to group companies. Specifically, only 25% of sales may be made to related firms. Myntra allegedly breached this limit by routing all its sales to Vector E-Commerce, thereby disguising true retail operations under a wholesale model. The ED’s complaint includes not only Myntra but also its related firms and directors, signaling that the Indian government is serious about accountability.
Why the Myntra FEMA Crackdown Matters for Walmart and the E-Commerce Sector
This latest development is a major setback for Walmart, which owns Flipkart and, by extension, Myntra. Together, Flipkart and Myntra represent Walmart’s aggressive push into India’s booming online retail market. Myntra alone holds nearly 50% of India’s online fashion segment. The Myntra FEMA crackdown could complicate Walmart’s plans and force other global e-commerce players to reassess their India strategies. This isn’t the first time India has acted: Amazon and Flipkart have previously been investigated under similar claims of regulatory non-compliance. India has long been protective of its brick-and-mortar retail sector, wary that foreign-funded giants could edge out small, local businesses. By enforcing FEMA more stringently, Indian regulators aim to create a more level playing field, but at the cost of increasing legal and operational complexities for foreign players.
What’s Next for Myntra and India’s E-Commerce Regulation Landscape
While Myntra continues to expand into fast-growing categories like home and beauty, and even experiments with influencer-led social commerce, this legal blow could stall its growth trajectory. The fashion platform has been exploring new revenue streams through quick commerce and social shopping, aiming to compete with the likes of Instagram Shopping, YouTube influencers, and Amazon Live. However, the Myntra FEMA crackdown puts its current operating model under intense scrutiny. If the ED’s complaint leads to penalties or structural changes, Myntra may have to redesign its entire business model to stay compliant. More broadly, this action signals that Indian regulators are no longer tolerating creative workarounds. Companies like Amazon, Walmart, and others seeking market share in India must now prioritize legal transparency, local partnerships, and strict compliance to avoid similar enforcement action.
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