1. Lobbying in India?

2. Executive Summary
 With the Indian retail sector estimated to be worth $500 billion as of 2012
and projected to cross $1 trillion by 2020, the country is a top destination for
global retailers.
 Wal-Mart has aspirations of becoming India’s top retailer by 2015.
 In late 2012, Wal-Mart revealed it had spent $25 million since 2008 on
lobbying activities to “enhance market access for investment in India.”
 Disclosure came weeks after Indian governments’ controversial decision to
permit foreign direct investment (FDI) in the multi-brand retail sector
 Uproar in India – Political parties demanded investigation
 Wal-Mart believed it had been unfairly targeted. Wal-Mart maintained it had
used the funds for legal lobbying activities.

3. Executive Summary
 Growing resentment towards the company among some groups in India.
 “Lobbying” in India was considered a “dirty” word.
 Groups protesting against FDI in multi-brand retail, particularly smaller
domestic retail stores, used Wal-Mart’s disclosure to advocate their case.
 Opposition parties highlighted the disclosure as another example of foreign
interference in domestic policy-making. Derided the government as corrupt.
 Independent committee set up by the Indian government to probe WalMart’s lobbying activities.
 Along with investigation in India, Walmart also had to consider the possibility
that the actions of its agents might have violated the U.S. Foreign Corrupt
Practices Act (FCPA).

4. The Indian Retail Sector
 The retail sector accounted for 23.6% of India’s GDP and employed 9.8% of its
workforce
 A.T. Kearney, ranked India as the fifth most attractive nation for retail
investment among 30 emerging markets in 2012.
 The country had the second highest shop density in the world, with 11 retail
outlets for every 1,000 persons.
 The sector comprised organized and unorganized retail. Organized retail
represented a small (5%), but growing component (15% to 20% CAGR) of the
total retail sector.
 A report by PricewaterhouseCoopers (PwC) identified high rentals, rising land
costs, value conscious consumers, complex tax and regulatory structures and a
fragmented supply base as risks faced by Indian retail companies.
 A.T. Kearney believed both formats would continue to co-exist and unorganized
retailers would reinvent themselves to stay competitive.

5. FDI in the Retail Sector
 After liberalization of economy in early 1990’s, India opened up select sectors to
FDI to access capital, technology and management skills.
 Finally in 2000 government permitted FDI in most sectors, barring a few.
 Retail was one of the sectors where FDI was not permissible.
 The sector was politically sensitive and strategically important to the country.
 It was widely believed that “the diversity of the sector, and the livelihoods that
were at risk, necessitated the government’s protectionist stance”.
 However, amidst the emergence of a large number of domestic organized
retailers, growing middle class consumerism expectations that foreign retailers
will source products from India, the Indian government began to revisit its FDI
policy for the sector and introduced modifications.

6. FDI Limits for Select Sectors in
India

7. Wal-Mart
 Wal-Mart is a publicly listed American corporation, founded in 1962 by Sam
Walton, Wal-Mart’s retail units sold a wide range of products including apparel,
electronics, groceries, home furnishing, hardware, pharmaceuticals, etc.
 In 2013, it was the largest retailer in the world with 10,000 retail stores in 27
countries, serving 200 million customers weekly.
 Largest private employer in the world, employing nearly 2.2 million individuals.
 One of America’s most profitable companies with net profit of $16.9 billion in
2012.
 It operated stores in diverse formats ranging from cash and carry stores,
membership warehouse clubs, soft discount stores, supercenters to general
merchandise stores.
 Wal-Mart had set up operations in Canada, China, United Kingdom, Japan and
other countries through JVs and acquisitions.
 Its international sales in 2012 accounted for 28% of overall consolidated net
sales

8. Wal-Mart in India
 Wal-Mart, in partnership with Bharti Enterprises launched wholesale operations
in India, in 2007
 Through a 50:50 JV, they created Bharti Wal-Mart Private Limited and opened
their first store ‘Best Price Modern Wholesale’ in Amritsar, Punjab in northern
India.
 The JV’s operations were restricted to wholesale, since regulations did not
permit FDI in multi-brand retail.
 Wal-Mart “chose to partner with Bharti rather than staging a solo entry into
India” because Bharti Enterprises knew “how to get things fastest in a country
that is very complex in nature.
 The JV sourced 90% of its goods locally. It expanded its presence across India
and by 2012, operated 20 stores across eight states
 Wal-Mart intended to operate retail units in the country if FDI rules were
relaxed.

9. Wal-Mart: Controversial Image
 Despite its success, Wal-Mart acquired a controversial image.
 Its policies to achieve low prices faced criticism from several groups.
 In the U.S., the company was accused of paying low wages, offering poor
working conditions and violating state and federal laws.
 A study found that Wal-Mart employees earned 12.4% less than other retail
employees in the U.S. and that opening of one Wal-Mart store pushed down
local retail wages by 0.9%.
 Wal-Mart’s pricing practices were also suspected of driving out local
competition and forcing many retailers to shut down.
 Its procurement practices were disapproved as its size and high-volume
procurement allowed it to set prices for agricultural products and manufactured
goods, thereby ‘squeezing’ small suppliers, producers and farmers.
 The company was also accused of encouraging American companies to move
factories and jobs overseas, forcing lay-offs among its suppliers

10. Lobbying is the process by which
individuals, special interest groups, business
associations or community organizations
influenced policy and positions of public
officials.

11. Lobbying: Global Experience
 Many countries saw lobbying as an integral part of democratic functioning that
allowed individuals and groups to legitimately influence decisions that affected
them.
 Lobbying took various forms such as grassroots advocacy and advertising
campaigns, participation in trade associations, campaign contributions, direct
engagement with public officials and hiring of lobbying firms or lobbyists.
 Australia, Canada, Germany, Hungary, Poland, Taiwan and the U.S. are some
such countries. These countries used regulations to enhance transparency
around lobbying.
 In the U.S., lobbying was federally regulated under the Lobbying Disclosure Act,
1995.
 This Act required lobbyists to register and report lobbying fees above a certain
amount. It also required companies to report all lobbying expenditure along
with the list of issues, lobbyists involved and the public officials and offices
contacted.
 Nevertheless, lobbying was considered ethically ambiguous. Regular scandals
had led to skepticism about the role of lobbying in a democracy

12. Lobbying by Wal-Mart
Annual Spending on Lobbying by Wal-Mart Stores in the U.S. from 1998–2013

13. Lobbying in India
 Lobbying is a dirty word in India; one reason being that lobbying activities were
repeatedly identified in the context of corruption cases.
 For example, in 2010, leaked audio transcripts of conversations of an influential
Indian lobbyist, Nira Radia, revealed murky dealings between the government
and several Indian business groups, reinforcing public perceptions about
lobbying.
 While lobbying was not a new phenomenon in India, it was largely unregulated.
 There were no laws that defined the scope of lobbying, who could undertake it,
or the extent of disclosure necessary.
 Companies were not mandated to disclose their activities.
 Lobbyists were neither authorized nor encouraged to reveal the names of
clients or public officials they had contacted.
 The distinction between lobbying and bribery was unclear.
 As the number of scams and scandals increased, there was growing debate on
whether or not lobbying should be regulated.

14. Walmart Lobbying in India?
 Apr 2012: The New York Times reports executives at Wal-Mart’s Arkansas
headquarters suppressed an internal probe that found evidence that its Mexican
subsidiary had paid bribes to open more stores in Mexico.
 Sept 2012: India allows up to 51% FDI in multi-brand retail.
 Nov 2012: Wal-Mart discloses it had expanded its bribery investigation initially
focused on Mexico to India, China and Brazil; Bharti Wal-Mart suspends a few
employees to ensure a “thorough investigation.”
 Dec 2012: Wal-Mart’s US lobbying disclosure disrupts parliamentary proceedings.
Opposition parties called for an investigation into Wal-Mart’s lobbying activities.
 Jan 2013: A committee set up to probe Wal-Mart’s lobbying activities in India.
 Jun 2013: Raj Jain, CEO, Bharti Wal-Mart, resigned from the company after heading
the company for close to six years in India.

15. Lobbying Techniques
 According to Cherian, there were two types of lobbying in India:
Overt Lobbying
It include activities such as developing whitepapers, conducting studies, offering
technical expertise, testifying in parliamentary committees and informing the
public through campaigns and press conferences. Cherian summed it up as
“everything that is legitimate.”
Covert Lobbying
Covert lobbying, in his view, was “when big money started to move in.”
 Working with associations allowed companies to pool resources, avoid duplicating
effort, and achieve economies of scale.
 Cherian added, “When you lobby in groups, the opportunity for large-scale
corruption gets reduced.”

16. MNCs Lobbying in India
 Enron Corporation’s disclosure to the U.S. Congress of spending $20 million
to “educate Indians” on the benefits of its proposed power project in the
state of Maharashtra, India. This was considered a code word for bribes given
to the then BJP-led government to overcome opposition to the project.
 The MNC have attempted to lobby through business associations. Some
anonymous country head elaborated:
“Business associations like CII and RAI have specific committees focused on retail. These
committees represented the broader interests of the sector. I was an office bearer in
several of these committees. When I met the same policymakers in this capacity, the
engagement was different as they saw us bearing the mantle of the entire retail
fraternity. They no longer saw us as a company acting in its self-interest. This allowed
us to be successful.”
 A key Advocacy institution for U.S.-based multinationals in India was the
USIBC, the autonomous Indian arm of the U.S. Chamber of Commerce that
served as “the direct link between American and Indian business and
government leaders.”

17. MNCs Lobbying in India
Aerospace Industries Association of America
Morgan Stanley
Alcatel-Lucent, USA Inc.
National Chicken Council
Business Roundtable
National Milk Producers Federation
Cargill Inc.
National Turkey Federation
Corning Inc.
Pfizer Inc.
The Dow Chemical Company
Prudential Financial Inc.
Dell Inc.
Rio Tinto Services Inc.
Hewlett-Packard Company
Software and Information Industry Association
Honeywell International
Technology Association of America
IBM
Telecommunications Industry Association
International Intellectual Property Alliance
Walmart Stores
Mead Johnson Nutrition
Whirlpool Corporation
List of Companies that Lobbied on India-Related Issues in the U.S in 2012

18. Indian Companies Lobbying in the
U.S.
 Several Indian companies hired lobbyists to lobby in the United States.

Ranbaxy, an Indian pharmaceutical company, paid $90,000 to Patton Boggs
to “preserve access to affordable generics.”
 Reliance Industries was a client of lobbying firm Barbour, Griffith & Rogers
and reported spending $2 million on lobbying over four years.
 Tata Sons hired the Cohen Group to lobby on an issue described as “market
research in the automotive, defense and energy sectors.”
 Wipro, like many Indian software firms, lobbied in the U.S. for favorable visa
policies.
 Documents with the U.S. House of Representatives reveal that over the years,
around 27 Indian companies have spent thousands of dollars doing the same
in the U.S.”

19. Trouble for Wal-Mart in India
 Wal-Mart’s routine disclosure to the U.S. Senate on its lobbying expenditures
stirred a controversy in India.
 The company was accused of engaging in illegal activities to gain market
access.
 Some believed the issue had been politicized.
 Groups protesting against FDI wanted to make an example out of Wal-Mart.
 Those frustrated by corruption scandals and lack of regulation on lobbying
used Wal-Mart’s disclosure to highlight these issues.
 In the course of an internal investigation, several key executives associated
with Wal-Mart in India departed the company
 Wal-Mart now faced the issue of how it could rebuild itself to take a leading
role in India’s lucrative retail sector.

20. Thank You
Group Members Abhishek Jain (02)
Neha Wahi (39)