Why do Foreign Corrupt Practices Act enforcement actions happen?
Often times – as highlighted numerous times on these pages – the root cause of an FCPA enforcement action is a foreign law or regulation that results in a real point of contact between a real company’s employees or agents and a real “foreign official.”
Regulatory burdens (ranging from customs procedures, licensing and certification requirements, foreign government procurement policies, etc.) create bureaucracy, bureaucracy creates interactions with foreign officials, and the more interactions with foreign officials, the greater the FCPA risk will be. It really is not that complex of a formula.
As highlighted in this prior post , although Transparency International’s Corruption Perceptions Index is a popular metric for compliance professionals, the World Bank’s Ease of Doing Business rankings  is often more meaningful given that it ranks countries based on factors such as the ease of starting a business, obtaining permits, and otherwise dealing with regulatory officials.
Consider just one industry in one country – the alcoholic beverages industry in India. Among other things, the government has a hand in production hours; shipment of product; product inspection; label registrations for product; and product sales to retail sales, product placement and promotions.
Against this backdrop, it is really not surprising that not just one, and not just two, but three alcoholic beverage companies have resolved FCPA enforcement actions concerning conduct in India.
- See here  for the 2011 Diageo enforcement action.
- See here  and here  for the 2016 ABInBev enforcement action.
- See here  and here  for the 2018 Beam enforcement action.
The above information provides relevant context to this recent article  in the Wall Street Journal titled “Diageo Woos States in India That Want to Deter Drinking.” In pertinent part, the article states:
“Johnnie Walker-maker Diageo PLC is betting on India, the world’s largest whiskey market, to power its growth. But first, it has to win over dozens of local governments that want to either ban liquor or tax it heavily, even as more Indians embrace drinking.
To protect sales, Diageo is helping a number of Indian states develop tax policy. To demonstrate that it is a responsible actor, it is rolling out road-safety programs. Diageo is even presenting ways that states can move up India’s ease-of-doing-business rankings—which are important for attracting investment—by cutting red tape for alcohol.
Navigating India’s volatile regulations is an increasing area of focus for the world’s biggest whiskey maker, especially because it is counting on the country’s burgeoning middle class to offset slowing drinking in the West.
India is one of the world’s toughest places to sell alcohol. Booze is subject to a complex patchwork of state-by-state regulations, alcohol advertising is banned and imports are taxed at 150%. Diageo India requires about 200,000 permits and approvals each year to do business.
Influencing regulation in India is like “trying to break a rock,” said Diageo India head Anand Kripalu at an investor event in May. “You’ve got to chip away, chip away and one day it’ll part.”
Because regulatory burdens are the root cause of many FCPA enforcement actions, the U.S. government can bring as many FCPA enforcement actions as it wants, but it is not going to change the underlying root causes.
Such as a company in India needing 200,000 permits and approvals each year from government to do business.
Strategies For Minimizing Risk Under The FCPA
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