Wal-Mart, Metro Cash flouting FDI norms, selling to retail buyers
Multinational retailers Wal-Mart, Metro Cash & Carry and Carrefour, which are allowed to sell goods and merchandise only to wholesale customers in India, are blatantly violating rules and selling to individuals, an undercover investigation by web portal Cobrapost.com has shown. The portal, which has recorded the entire operation on video, has shared its investigation report exclusively with HT.business Updated: Nov 20, 2014 17:01 IST
Multinational retailers Wal-Mart, Metro Cash & Carry and Carrefour, which are allowed to sell goods and merchandise only to wholesale customers in India, are blatantly violating rules and selling to individuals, an undercover investigation by web portal Cobrapost.com has shown. The portal, which has recorded the entire operation on video, has shared its investigation report exclusively with HT.
Employees at stores owned by these companies said individuals living in the neighbourhood routinely shopped there. “Apnay ghar kay liye hai (It’s for my home),” a shopper told the undercover Cobrapost correspondent, who had met executives of these stores and offered to bring a busload of shoppers to shop at these stores a couple of times a month in return for a cut either from the customers or the company. Another shopper said: “Hum toh ghar kay liye letey hain – do mahiney ka ek saath (We buy for our home, for two months at a time).”
The US-based Wal-Mart is the world’s largest retailer. Carrefour, which wound up its Indian operations in July this year citing regulatory issues, is headquartered in France, and Metro is a German company. Indian laws allow 100% foreign direct investment (FDI) in wholesale trading under the condition that these companies do not sell any goods to end users. According to norms, only retailers registered with these companies are allowed to shop at these stores.
Every retailer is given one primary card and two add-on cards. At any point in time, only three such authorised cardholders are allowed entry into these shops, but employees of these companies said they were ready to allow many more people to enter – the figure varied between nine and the entire busload that the Cobrapost correspondent said he would bring. Then, retailers who register to become members have to give an undertaking that the goods they buy from these stores will not be used for personal consumption and children under 14 aren’t allowed entry.
The operation in Delhi, Mumbai, Meerut, Agra, Amritsar, Jalandhar, Ludhiana, Bhatinda; Zirakpur, Bhopal, Indore, Jaipur, Aurangabad and Amravati – between April and July this year showed all these norms being blatantly flouted, often with active participation from Wal-Mart, Carrefour and Metro staff.
None of these companies responded to a detailed Cobrapost questionnaire on these violations. “Our investigation has not led us to any government officials. Our focus was on the specific stores that were indicated by our sources where retail shopping was being allowed under the guise of wholesale trading,” Aniruddha Bahal, editor, Cobrapost told Hindustan Times.
However, he said, all the three chains had interpreted the foreign direct investment rules (FDI) governing wholesale and established their own rules of engagement with their customers. For example, FDI rules do not mention add-on cards. Nor does it stipulate the number of people who can accompany the main or the add-on cardholder. However, the registration forms of Wal-Mart Best Price and Metro clearly mention these clauses on the reverse side. “It can only be inferred that such an arrangement can be put in place only with government approval,” said Bahal.