Saturday, 13 October 2012

WAL-MART - Something's Not Right

The day following Thanksgiving Day which is popularly called Black Friday is the day on which retailers in USA log there biggest single day sales. Huge discounts are customary, shops open in the wee hours of the day and shopper queue up all night in front of the stores for them to open in order to be the first to take advantage of the limited stock available on discounts.

Having witnessed the craze first hand myself, I know how packed the stores can be on this day and how difficult it becomes for the staff to cope up with the rush of customers. Living in India I would have never imagined that people could queue up all night simply to shop but then USA is not India. But guess what who is potentially likely to be a big looser on this shopping festival come November 23rd this year. It is the biggest retail of the world of our times and human history. WAL-MART has been threatened with a nation wide strike on November 23rd by its workers protesting low wages and questionable labour practices.

Labour unrest against WAL-MART has been brewing in the USA for a long time now. I had earlier written on my post about the public protests that WAL-MART's business practices have invited even in the developed countries where WAL-MART has a big presence. The latest episode of unrest has the potential to cutoff WAL-MART from the years biggest single day shopping festival in the USA. 

Both The Hindu and The Economic times carried stories on this threat issued by the workers of WAL-MART. The story was released by PTI but guess what caught my eye. The same PTI story had also appeared else where ad verbatim on NDTV website but the economic times article which never appeared on the print version at least I could not find it. My apologies if it appeared but I missed it. It may have been an honest mistake but let me reproduce the portion missing from ET report.

"Hector Sanchez, executive director of the Labour Council for Latin American Advancement alleged that as the largest employer of African Americans, women and Latinos, Walmart, through its low wages, lack of benefits, and discriminatory employment policies, is eroding the foundation that the middle class was built upon.

In another statement, “Our Walmart” said that workers from stores throughout the Dallas area, went on strike on Tuesday in the first-ever Walmart Associate walk-out in Dallas, protesting attempts to silence, and retaliate against workers for speaking out for improvements in the job.

Walmart workers from stores in Miami, the DC-area, Sacramento, Southern California and the Bay-area are also walking off the job, it added."

So the report is saying that a labour council head is alleging discrimination against the economically weaker sections of the society by employing them on such low wages that it denies them economic progress. WAL-MART does not recognize labour unions of its employees in the USA and has been accused of using hard tactics to prevent unionization of its labour force. There is also a statement from "Our Walmart" a Walmart workers group not recognized by WAL-MART that worker had already gone on strike in Dallas area against attempts to block them from raising working condition issues.

So that's the story of note about WAL-MART as it is unfolding in the USA. In India meanwhile a different story is emerging, one which potentially involves the government. Let me give you some back ground on it. I had written in a previous post about the Delhi High court notice to the government in July this year in response to a PIL filed by Ms Vandana Shiva a noted environmental activist alleging FDI norm violations by WAL-MART. FDI in multi-brand retail was allowed only subsequently in September this year. After the union government's decision to allow FDI Ms Vandana Shiva withdrew the PIL on 3rd October. Recently CNN IBN has reported on the same story on 10th October raising a question whether WAL-MART and Bharti violated the FDI norms as they existed then.

The alleged violation is that Cedar Support Services(earlier known as Bharti Holding Ltd) which operates multibrand retail for Bharti under Easy Day brand changed its charter of operation in 2009 to enable it to provide real estate consultancy services. Since consultancy services businesses are allowed foreign investment up to 100% via the automatic route the CNN IBN report alleges that roughly USD 100 million were invested by WAL-MART in Ceder Support Services in the form of debenture convertible to equity. The conversion date was earlier Sep 2011 and it was extended to Sep 2012 i.e. the same month and year when multi-brand retail FDI policy was changed by the government. On conversion WAL-MART will as per the report own 49% stake in the company. Figures of interest to note here as per the CNN report USD 100 million which is about same as the GOI policy on Multi brand FDI, it may be a mere coincidence but WAL-MART looks like got the figures just right . Ceder is also reported to have invested the entire proceeds in Bharti Retail.

CNN report raises suspicion that WAL-MART and Bharti have used circuitous route to get around the policy as it existed then and only ex post facto policy changes have made it legal for them to have done so. That begs the question whether companies can use questionable business practices to get an edge on their competition by flouting legal norms in anticipation of a subsequent change in law which will allow their business competitors to enter the market. 

Yesterday I raised an email query to Ms Vandana Shiva as to what prompted here to withdraw the PIL I got a reply from her stating "Our case was based on FDI in retail not being allowed. Now it is allowed. And we need to reframe the case for the new policy context.". As a concerned citizen I hope she is able to 're frame' her PIL and submit it, although I doubt it will happen. Today ET reported that PMO has asked DIPP under the commerce ministry to probe into the alleged violations. This appears like a clear case of passing the buck by the Prime Minister; if he was really serious of a probe then he should have ordered it when the PIL was filed and the issue was brought to his attention by his parliament colleague M P Achuthan, not after the FDI norms were already changed in favor of WAL-MART. The same commerce ministry which is probably involved in the murky affair will now probe its own dealings. 

In the same article ET mentions "According to its balance sheet for the year ended December 2011, Cedar Support had a capital of Rs 899.15 crore that included share capital of Rs 443.15 crore from Bharti Ventures and a Rs 455.80-crore CCD investment by Walmart. Almost the entire amount (approx Rs 862 crore) had been invested in the Bharti Retail through investments and loans, the documents show."

The same company has been recently caught red handed trying to hush up a bribery scandal involving its officials in Mexico. Something is really very fishy here and I doubt if we will have any closure on this. WAL-MART it appears has successfully managed to impose itself on the people of this country when there was no popular support to Retail FDI and by manipulating the system it appears to have beaten its competition in the race to enter the country. This whole affair gives me another reason why I don't support Retail FDI.

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