Wal-Mart's Bribery Problems

Walter Olson has been writing a lot about Wal-Mart and FCPA.  I don't have a lot to add except my own experience working for a large corporation in third world countries.

I worked for a manufacturer of industrial equipment for years.  In most countries in Europe and North America, part of our strategy was a dedicated in-house sales force that could provide a high level of technical support.  But we went away from that strategy when we went into third world countries, just the place where we needed more rather than less technical support for our customers.

Why?  A big reason was the FCPA.  There are many countries where it is simply impossible to do business without paying bribes.  Bribes are absolutely wired into the regulatory process.  In Nigeria, public officials are paid less with the expectation they will make it up on bribes, similar to the way we pay waiters who get tips.  The only way to legally work in these countries is to work through third party resellers and distributors and other such partners, and then tightly close your eyes to how they get things done.

What always ticks me off about these cases is the fake attitude of naivite in the press that seems to be constantly amazed that corporations might have to pay bribes to do basic things we take for granted here, like get the water turned on or have your goods put on a ship.  But in fact reporters can't be this naive, as they almost certainly have to deal with many of the same things in their business.  I would love to see an accounting of the grease payments the NY Times pays in a year in foreign countries.

I think most people when they hear these foreign bribery cases assume corporations were paying to get a special advantage or to escape some sort of fundamental regulation.  And this is possibly the case with Wal-Mart, but more likely they were simply paying because that is what you have to do just to function at all.


  1. Quizikle:

    If I'm hearing the news correctly, one could interpret the US position as requiring Wal-Mart to pay a bribe - oops, I mean fine - to some official organization here in order to do business in Mexico.

    A tax on the bribe?

  2. btf:

    They also usually fail to mention that it is perfectly legal for European companies to pay such bribes. For American companies the only way they can compete is to have local "agents" who are paid a commission. Most of the commission of course ends up being paid as bribes. The only reason for this underhandedness is because we aren't allowed to do outright what European companies are.

  3. Griffin3:

    Here in the US, we don't pay bribes. We pay money to influence the actions of an official or other person in charge of a public or legal duty, in order to get permission to do what would be is otherwise legal and possible, except for their actions. But we call them licenses.

    See the difference?

  4. Noah:

    Griffin3 - or campaign contributions.

  5. Jon:

    Ditto on what Griffin3 & Noah say. We have to pay the man too. You can call them licensing, campaign contributions, regulatory taxes, corporate taxes, businesses taxes, or just plain taxes, they're all just payments to the mafia, oh, I mean the completely "lawful" government.

  6. W. C. Taqiyya:

    This is interesting material. It seems like just yesterday I was giving myself the nickel tour around the issue of an imminent Chinese invasion. You know, rumors. The evidence for which is apparently based on the fact that China is building several large manufacturing or other business facilities around the country. Now, it seems these projects are real and pumping money and jobs into our economy, the states in which they are located are giving them tax breaks and the Chinese want to locate here because this is where their largest customers are. So, it checks out. Now I have to figure out why so many otherwise reasonable people are suckered into crazy ideas? Yes I know, people whimpered when it was the Japanese invasion too. I think I will begin a rumor that Cuba is ready to invade us. Anyway, I wonder if the Chinese chose America over Mexico because we bribe them and Mexico demands bribes? It's all part of a large conspiracy.

  7. Griffin3:

    "A day after my column appeared, the 69-year-old vendor got hit with four summonses. None of them, surprisingly, had anything to do with the business license he needs for a newsstand. A detective from the licensing department gave him two tickets for not having an eatery license and another two for not having a food license." --> http://reason.com/blog/2012/04/26/newark-targets-newsstand-after-owner-tal

    See? It's different from a bribe. Much more retaliatory. The non-issuance of the newsstand license after 40 years in business is where the bribe would've come in.

  8. Don:

    This reminds me of nothing so much as the mob moving in on some small-time hood and requiring a piece of the action. If Walmart's paying Mexicans politicians, then it's only "fair" that the American pols get paid too.

  9. Bart Hall (Kansas, USA):

    There's even something of a free market in bribes. If you want to get a container of coffee onto the ocean from Guayaquil, Ecuador it'll cost you about $5,600 in bribes overall. Go 200 klics up the coast to Manta and the same container export will only cost you about $1,200 in bribes. The local bribees count on that, and keep their rates low enough to attract quite a few containers. Recent rumor has it that officials in Guay are actually reducing their demands in order to be more competitive with Manta.

  10. W. C. Taqiyya:

    Malicious prosecution. Selective prosecution. You know, he has options. Looks like he's some form of protected minority so ACLU might like him for a case. Or, any underemployed lawyer just itching for some publicity. Gee, I wonder if there are any available? First government reactions are almost always something stupid like this; seen it many times. Now, they might get their backs up and fight but the vendor should prevail in the Superior Court, Law Division or the Appellate, if it gets that far. Municipal is 100% in the city pocket, I would expect a loss there. With Star -Ledger support, this may be put to bed sooner. Nice job BTW.

  11. IGotBupkis, Legally Defined Cyberbully in All 57 States:

    Yeah, this was pretty much my own take on the situation, Warren:

    "What? Mexican bureaucrats were expecting bribes? And Wal-Mart PAID them? GASP!!
    I am Shocked!!
    Shocked, I say!!
    To find out this has been going on here...!

    Ridiculously absurd. Even if Wal-Mart WAS paying for some special dispensations, that's something to somewhat discourage but it hardly represents a surprise or realistic expectation to have there be none of that.

    John, Noah, Griffin:
    a) The amounts are fixed and in the open.
    b) They are nominally applied to all across the board
    c) While I'm sure one can find random exceptions/special dispensation, who one knows or is related to does not affect the need for licensure payments.
    d) They don't go directly into the personal pockets of the collecting bureaucrats for the most part.

    Q.E.D. -- This is NOT the same as bribes. I grant there's some similarities, but it's probably one hell of a lot less in total amounts, too.

  12. DensityDuck:

    Thing is, this was supposed to be like Dodd-Frank, in that the belief was that all you had to do was make bad behavior illegal and the "free market" would provide a solution. Make it illegal to bribe people, and therefore nobody would do busines in countries where corruption was rampant, prompting those countries to clean up their act, right?