Press reports have come out with supposed “news” – the Justice Department is considering launching a new industry sweep of global retailers. This is no surprise.
Recent events have underscored the risks that global retailers face when entering new markets. There are plenty of risks facing global retailers – their business depends on customs approvals, licensing and zoning permits.
The Justice Department’s launch of a new industry sweep against global retailers is a significant development. The health care industry was the last target of the Justice Department sweep. The healthcare sweep has been very successful – pharmaceutical and medical device companies have paid significant fines. There are approximately 20 companies still under investigation. The health care sweep was aided by the cooperation of a major health care company and lead to a detailed understanding of industry practices and anti-corruption risks.
A global retail industry sweep reflects the assistance of one or more cooperating companies. A cooperating company has and may continue to provide detailed information on industry practices and could have specific information about bribery committed by other companies in the hope of earning a more lenient sentence for its own violations.
With detailed information, the Justice Department is able to focus its inquiry. In the coming weeks, global retailers across the industry should receive either grand jury subpoenas or inquiry letters depending on the information the Justice Department already has gathered. The Justice Department inquiries will cause companies to conduct their own internal investigations, make disclosures, and negotiated settlements.
An inquiry letter can send a shockwave through a company. Some companies never expect to receive such a letter. The company has to be careful not to brush aside the inquiry letter or to underestimate the significance of the letter.
Global retailers would be smart to start their own internal investigations, compliance assessments, and remediation if appropriate. The sooner they discover the problems the sooner they can address the problems.
In significant enforcement actions, targeted companies typically seek remediation assistance early in the process. It is important to focus on those pressing problem areas, start to address the problem and institute temporary or even new policies and procedures to reduce the risk.
This is the beginning of a long and slow process for the global retail industry which will face a number of bumps in the road. As the healthcare industry sweep continues on in its fifth year, the global retail industry could be under the microscope for the next five years or more.
The Justice Department would not launch a new industry sweep without having a lot of information about ongoing corrupt practices. Companies which act proactively will come out ahead; those that wait could easily suffer harsh punishment.