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Harry Cassin
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Andy Spalding
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Jessica Tillipman
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Cody Worthington
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Thomas Fox
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Marc Alain Bohn
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Bill Waite
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Russell A. Stamets
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Wal-Mart’s Victims Part IV: Enforcement’s Complicated Impact

In this series we’re talking about the FCPA’s impact on developing countries. (Those who know me know that it’s all I talk about, really. But someone’s got to do it.). 

Let’s say that the FCPA could have any of three net impacts on developing countries: it could help those countries, it could be neutral, or it could harm them. And let’s say that it need not be just one; it could be mixed.

Now let’s look at the Dow Jones Compliance Survey released last week. It found, among other things, that nearly 55% of respondents “stopped or delayed” a push into emerging markets because of potential anti-bribery liability, and that this number is up 15% from 2009.

So is this good for developing countries, neutral, or bad?

Doesn’t the answer depend on what we think happens when the companies subject to FCPA jurisdiction stop or delay those projects? Sometimes, I suppose, the governments of those developing countries change their ways. That is certainly good. And sometimes, I suppose, they just concede the lost foreign investment. That may be good, perhaps neutral.  But what happens when the bribe-solicitors look for other bribe-paying companies? And find them, often coming from countries that don’t enforce anti-bribery laws? And if those bribe-payors pay those bribes, what then is the result in the developing country?

This is a fact that any honest supporter of anti-bribery law must grapple with, and now. Companies subject to FCPA jurisdiction are almost certainly paying fewer bribes across the developing world, but that does not mean that fewer bribes are paid there. Indeed, it could mean the opposite. And that’s the problem with enforcing the FCPA as if it were nothing more than an instrument of white-collar crime.

If we enforce the FCPA without careful consideration of its impact in developing countries, the impact may not be all good. Indeed, it could be very bad, when companies who won’t pay bribes are replaced by companies who will. The economists call it ownership substitution. And nobody who testified before Congress in the 1970s in support of enacting an anti-bribery law thought it should do this.

But we can fix it, and it won’t require congressional amendment. Let me try to show you how.


Andy Spalding is a senior editor of the FCPA Blog. His prior posts are here.

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