Walmart India sets up special team for anti-corruption compliance

Walmart Battling Corruption Charges

The spokeswoman, however, did not respond on whether it was possible to do business in India without bribery in a sector that required 51 approvals to open a store. She also did not elaborate on the challenges faced by the company in opening a store.

Walmart is battling corruption charges since news broke last month that its Mexican arm, Walmex, bribed local officials over several years to secure speedy approvals for opening new stores. The probe is being carried out by the Department of Justice and Securities and Exchange Commission in collaboration with Mexico's government agencies. While managers at the group’s headquarters in Bentonville, Arkansas, were apparently informed about the payments in 2005, and even a probe was launched, the retailer wound up investigations without taking any action or disclosing it to authorities until last December.

Under FCPA’s stringent rules, bribes cannot be camouflaged as legal or consultant fees, a Walmart executive said. If external consultants are hired for a particular job, the nature of the job must be specified. The time spent with the officials (government or private), too, must be conveyed to the monitoring team, the executive added. The FCPA website says 400 American firms have collectively paid $300 million in bribes and other questionable payments to foreign governments and political parties, and also directly to the accounts of government officials.

Under Indian regulations, a company requires 50-51 licences to open a store, which can be a drag on its expansion plans. “The issue is not just many licences, but multiple authorities that need to approve licences,” said Kumar Rajagopalan, CEO of the Retailers Association of India, an industry body representing modern retailers.

Confronted with saturated markets in the US and other developed countries, Walmart entered India in 2008 to establish presence in a market where modern stores make up just 7-10 per cent of the retail industry. While India does not allow foreign companies to set up independent front-end retail stores, it has not stopped Walmart from setting up a joint venture with Bharti Enterprises, an Indian conglomerate, to open about 17 Best Price Modern Wholesale stores.

For the year ended December, Bharti Walmart posted sales of Rs. 1,876 crore. For the same period, Walmart International’s sales from 28 countries stood at $109 billion (Rs. 6,09,400 crore).

According to a survey released by Ernst & Young in March, nearly threefifths of the respondents said their companies had been subjected to fraud during the previous year. “With more than 75 per cent of the respondents working in MNCs, less than half of them were aware of global anti-graft legislations, such as the US FCPA and the UK Bribery Act,” said the report titled ‘Fraud and corporate governance: Changing paradigm in India’.