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Anti-corruption probe: Why we should feel sorry for Walmart

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Since 3 Apr, 2012
Accessed 7 years ago
Anti-corruption probe: Why we should feel sorry for Walmart
Sat, 11/24/2012 - 10:17 (updated 7 years ago)

Anti-corruption probe: Why we should feel sorry for Walmart By Uday Khandeparkar (Economic Times)

Walmart's reporting to the US authorities of possible wrongdoing by its joint venture with BhartiBSE -0.91 % in India highlights the power of governance and law enforcement in America. Within our country, this company could have paid millions of dollars in bribes with no fallout whatsoever.

While the US's Foreign Corrupt Practices Act (FCPA) is laudable and should in theory help curb corruption around the world where American companies do business, it will probably do the reverse. The likes of Walmart, the world's largest retailer, will be at a distinct disadvantage against local rivals who will continue to bribe their way into reaching milestone number of stores.

In effect, this will stall foreign direct investment in retail, a move desired by politicians of various hues, giving them dual cause for celebration. Firstly, they would have protected the trader community and secondly, the "foreign hand" that sought to stop bribing will be shown its proper place.

The benefits to farmers from higher prices and lower perish of produce and to customers from more competitive rates and a wider range of products will be blocked by corruption in India.

Walmart may have voluntarily reported possible bribes in India, as the company has been under a probe by the US justice department following revelations in April that the company's Mexican arm, Walmex, had greased palms to speed the granting of permits to open new stores. The US government has in the past couple of years gone after Americans firms that bribe abroad and the largest fines slapped under the FCPA have been during this period.

Walmart has to be more careful than others that have been in the same boat, as the justice department may want to make an example of the company, given its high profile. Self-revelation of bribes paid in India may have been spurred by a belief that it may be treated more leniently when it comes to determining the penalty.

Think of starting a tea stall on Tolstoy Marg in Delhi and visualise the process you would have to go through. In addition to getting a fetching kiosk, a sturdy boy to deliver the chai and wash the chatties, you would most certainly set aside a wad of notes to get approval to start the tea mart.

The India Conundrum

Walmart's joint venture has set up 18 mega stores across India, and the US company is desirous of opening many more very rapidly because Walmart's domestic sales have slacked while overseas units have shown a sharper growth in sales.

The India fallout for Walmart will probably be restricted to the cost of an internal investigation, which can be expensive. For Bharti, the risks lie in it having to pay compensation on the quantum of fine in case it has indemnified Walmart, as is often the case in foreign-local joint ventures. 

Comments

lindseynicole's picture
Thanks for informative stuff.
Fri, 10/23/2015 - 12:25 Thanks for informative stuff.
karim's picture
Thanks for sharing
Mon, 11/26/2012 - 10:18 Thanks for sharing
mathan's picture
Nice article
Sun, 11/25/2012 - 10:17 Nice article

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