You may have been following the story of Wal-Mart in Chongqing for a while now. Seems they got into some trouble a while back for selling ordinary pork labelled as “organic” meat. The scandal has been dubbed the “green pork” incident, which makes me think more of spoiled meat than organic, but that’s just me I suppose.Wal-Mart was investigated and fined already for the fraudulent labelling, and I figured that this would be the end of the story. As you might be aware, China has more than a few food-related product quality scandals to deal with at the moment, and it makes sense that the regulator, the Administration of Industry and Commerce (AIC) would move on to their next target.
I was wrong, though. Apparently there was a final act in this little drama:
Wal-Mart has been ordered to temporarily close some stores in the Chinese city of Chongqing and to pay 2.7 million yuan ($421,000) in fines following an investigation into mislabeling of regular pork as “organic.”
The retail giant said Chongqing police had detained some of its employees over what has been dubbed the “green pork” incident. It apologized to shoppers for any inconvenience, saying Monday in a statement that it was cooperating with authorities.
According to most news reports, the closure was ordered by AIC following an investigation. In other words, this was not a voluntary move by the retailer. Additionally, while some press accounts suggest that the investigation is over and that the store closures were made so that Wal-Mart could implement new quality control measures, others say that the investigation is ongoing.
I don’t know which version of events is accurate, but the fact that AIC has detained a number of Wal-Mart employees certainly suggests that the investigation is far from over and that the store closure was not done solely for QC implementation (if at all).
So that’s one mystery. However, there’s another one that I find even more interesting: why did the AIC close these stores in the first place?
We all know the official reason, the whole “green pork” scandal. But as I mentioned above, there are a flood of other product safety incidents out there worthy of investigation, and in many cases, they involve food that presents a significant risk to human health. From my understanding, in this case, the “green pork” was not dangerous, just mislabeled as organic food.
Moreover, your average food scandal case, unless folks get sick and/or die, generally involves fines only, not store closures and detained employees. While certainly not unheard of, these measures seem rather heavy-handed given the facts released to the public. So why has this case garnered this kind of attention from the AIC, not to mention the media? What’s going on here?
Two explanations, which are not mutually exclusive. First, Wal-Mart seems to have a poor track record in Chongqing when it comes to food-related consumer issues:
The city has fined the stores 2.69 million yuan, Huang said, adding that Wal-Mart has been punished by the local government 21 times since 2006, when the company entered Chongqing, for exaggerated advertising and selling expired and substandard food.
Whether those 21 administrative actions were warranted or not, I think there’s a good chance that Wal-Mart is on AIC’s shit list. The store closures, which do seem pretty tough given that no food safety issues have been alleged, might be an indication that AIC is fed up by Wal-Mart’s history of problems in Chongqing. Perhaps the store closures were necessary so that a thorough, top-to-bottom investigation can be carried out?
Perhaps. But there is a second explanation that some may be postulating (appropriately sotto voce) in the foreign investment community, which is that Wal-Mart is being targeted as a foreign business. Is this possible? Of course. Do we have any evidence to back this up? Not really.
Look, it’s pretty much a truism that foreign invested enterprises in China often receive additional regulatory scrutiny compared to their domestic counterparts. That’s why lawyers like myself always tell our clients to keep their metaphorical noses clean — you never know when a new enforcement campaign will bring officials from the AIC, or the tax guys, or the labour bureau folks, to your doorstep to peruse your books.
So is this mystery of the closed Wal-Mart stores a cautionary tale? Hard to say, really. Perhaps Wal-Mart’s relationship with AIC in Chongqing, after constant problems over the past five years, compounded the punishment for this latest violation. Alternatively, maybe this action reflects the government’s tough new stance on food safety and consumer fraud. But yes, it’s also possible that Wal-Mart, as a foreign company, is being held to a higher standard.
At the risk of being trite, one could say that the real mystery here is why Wal-Mart allowed this to happen, via lax quality control, in the first place.
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