Walmart has a long, arduous path ahead of it as it tries to clean up its bribery scandal and subsequent cover-up.But what exactly did Walmart do wrong in the first place?
If the allegations are true, Walmart would have violated the Foreign Corrupt Practices Act (FCPA), which was signed into law by President Jimmy Carter in 1977, after SEC investigations found that hundreds of companies had paid millions to foreign officials and politicians.
Here’s what the law says, according to the U.S. Department of Justice:
The anti-bribery provisions of the FCPA prohibit the willful use of the mails or any means of instrumentality of interstate commerce corruptly in furtherance of any offer, payment, promise to pay, or authorization of the payment of money or anything of value to any person, while knowing that all or a portion of such money or thing of value will be offered, given or promised, directly or indirectly, to a foreign official to influence the foreign official in his or her official capacity, induce the foreign official to do or omit to do an act in violation of his or her lawful duty, or to secure any improper advantage in order to assist in obtaining or retaining business for or with, or directing business to, any person.
Basically, American companies (and people) can’t pay a foreign official to use his or her power to do something for you to secure a competitive advantage.
But is the FCPA naive? How common are these practices abroad?
Bribery is commonplace in many countries across the globe. It can mean anything from giving an official a small gift to obtain a building permit to paying off an entire political party to get a law passed. It’s part of the culture in some countries, and if you don’t play ball, it can be incredibly difficult to get anything done.
Look at how widespread corruption is, according to Transparency International’s latest Corruption Perceptions Index:
The FCPA is one of the harshest anti-bribery acts in existence. Even if the bribes are legal in the host country, if it’s in violation of the FCPA, the company is at fault. This is a point of advantage for non-American companies, most of which have no anti-bribery checks aside from whatever is deemed illegal in the country they’re doing business in.
Still, there’s tons of grey area. The FCPA distinguishes between a “grease payment” (paying an official to do something he was already going to do, but faster) and a bribe. Plus, at what point does a “gift” turn into a “bribe”?
Walmart stands accused to paying more than $24 million to win permission to open new stores and perhaps broke Mexican laws to do it, so there may be little grey area for the company to work with.
Even if it’s considered “business-as-usual” there, and even if it didn’t break any Mexican laws, it can still be considered a violated of the FCPA, which could create a mountain of problems for Walmart beyond a mere PR crisis.
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