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India Government Agency Probes Wal-Mart Investments

Dec. 5 (Bloomberg) -- An Indian government agency is investigating allegations that Wal-Mart Stores Inc. violated legal restrictions on foreign investment in the retail industry, Trade Minister Anand Sharma said.

The government received complaints alleging Wal-Mart invested in the retail industry before a September decision to loosen rules, Sharma told parliament today. Wal-Mart is “in compliance with India’s laws,” Arti Singh, a company spokeswoman, said in an e-mailed statement.

India’s central bank has referred the matter to the Directorate of Enforcement, an agency that investigates violations of rules relating to foreign investment, for further probes, the minister said. He didn’t say who filed the complaints.

The investigation adds to Wal-Mart’s troubles in India, where it recently suspended some workers at its joint venture, Bharti Walmart Pvt., as it examines potential violations of U.S. anti-bribery laws.

The government has received complaints that Wal-Mart and its partners Bharti Enterprises Pvt. and Cedar Support Services Ltd. have been engaged in retail trading that involves multiple brands, Sharma said. India in September opened up its retail market to allow foreign companies to own as much as 51 percent of local ventures that sell more than one brand. Overseas brands such as Wal-Mart had been banned from the supermarket industry until then.

“All procedures and processes have been duly followed” the Wal-Mart spokeswoman said in the e-mail.

Joint Venture

In 2007, Wal-Mart formed a joint venture in India for wholesale stores and has been building a supply chain and logistics network in the country.

Wal-Mart owns a 50 percent stake in the wholesale-venture with Bharti. Closely held Bharti runs its own chain of more than 186 Easyday stores including supermarkets. Bharti Airtel Ltd., India’s largest mobile phone carrier, is a part of the Bharti group.

The Bentonville, Arkansas-based retailer on Nov. 15 said it started inquiries into potential violations of the Foreign Corrupt Practices Act in India, Brazil and China. The U.S. Department of Justice and the Securities and Exchange Commission are looking into allegations Wal-Mart systematically bribed Mexican officials so it could more quickly open stores.

Lawmakers will today vote in parliament on whether they support the government’s decision to allow overseas retailers access to India’s retail market, estimated at $505 billion by Technopak Advisors Pvt., after opposition parties insisted on a debate on the matter.

While the decision to allow foreign investment in retail doesn’t require parliamentary approval to become law, rejection of the proposals in today’s ballot would expose the weakness of Prime Minister Manmohan Singh’s minority administration and sap investor enthusiasm for the centerpiece of his policy drive.

To contact the reporter on this story: Malavika Sharma in New Delhi at

To contact the editor responsible for this story: Stephanie Wong at

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