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Wal-Mart allegedly paid millions of dollars in bribes in India

By Manu Balachandran

This post has been updated with a response from Wal-Mart.

Wal-Mart, the world’s largest retailer by revenue, reportedly paid millions of dollars as bribes in return for regulatory clearances in India.

According to a report by the Wall Street Journal (WSJ) on Oct. 19, the American retailer paid bribes ranging from $5 to $200 to local officials in India to help clear goods through customs or for securing real estate permits.

“The vast majority of the suspicious payments were less than US$200, and some were as low as US$5, the people said, but when added together they totalled millions of dollars,” the WSJ reported. It is still unclear when these bribes were paid to Indian authorities.

The details have emerged during an ongoing US federal probe into allegations of corruptions at Wal-Mart stores in key markets. The probe began in December 2012 after the New York Times reported that the retailer paid $24 million in alleged bribes in Mexico. The investigation was later expanded to other emerging countries including China, India and Brazil.

In an emailed response to Quartz, Wal-Mart’s spokesperson, Jo Newbould, said:

“As we’ve said from the beginning, we are cooperating fully with the Government in this matter and can’t comment further on that process. For Walmart, compliance with the US Foreign Corrupt Practices Act (FCPA) and other anti-corruption laws is a key priority. We work closely with third-party compliance experts on support and training as we continuously review and strengthen our programs around the world.”

But it is unlikely that Wal-Mart would pay for these allegations in India.

“Because penalties under the FCPA (Foreign Corrupt Practices Act) are often connected to the amount of profit the alleged misconduct generated, the payments in India wouldn’t be likely to result in any sizable penalty, since Wal-Mart’s operations there haven’t been particularly profitable, said people familiar with the matter,” the WSJ noted.

Since starting out in India in late 2007 in partnership with Bharti Enterprises, Wal-Mart has had a bumpy ride in Asia’s third largest economy. For years, the company had to operate under a cloud of uncertainty since the Indian government failed to pass an act that allowed foreign direct investment (FDI) in multi-brand retail.

By 2013, the company had severed all its ties with Bharati Enterprises and decided to go solo in India. According to existing Indian laws, FDI in multi-brand retail is permitted up to 51%.

Wal-Mart currently runs 21 Best Price Modern Wholesale stores in cities including Amritsar, Jalandhar, Kota, Bhopal, Ludhiana, and Lucknow. The company plans to scale this up to 70 stores in the next five years.